By Kevin E. Noonan --
In a seriously fractured decision, the Federal Circuit construed the provisions of the Biologics Price Control and Innovation Act (BPCIA) today in Amgen v. Sandoz. In doing so, the Court limited the information available to biologic drug makers regarding a competitor's application for a biosimilar product (adopting Sandoz's argument). On the other hand, the decision extended the statutory exclusivity period enjoyed by innovator biologic drug makers relating to when the biosimilar applicant can enter the marketplace (as Amgen argued). An important aspect of the Court's decision involved the meaning of the term "shall" in statutory construction. While it may have seemed to many that the plain meaning of the word is evident (see "The Tyranny of the Judiciary"), it was not so to the Court and indeed by being interpreted permissively regarding one part of the statute and stringently regarding another raised the disagreement that prevented a majority opinion on both issues.
The BPCIA is a component of the Patient Protection and Affordable Care Act (commonly known as "Obamacare") and provides for the first time in the U.S. an abbreviated pathway for FDA approval of so-called "biosimilar" drugs, generic versions of biologic drugs. The Act contains complicated litigation provisions that have come to be termed the "patent dance" that prescribe how the parties (termed the "reference product sponsor" and the "biosimilar applicant") decide which patents will be litigated during the time prior to FDA approval.
The case arose over Amgen's drug Neupogen® (filgrastim) that was the subject of a biosimilar application by Sandoz. At issue was Sandoz's decision not to comply with one provision of the law (42 U.S.C § 262(l)(2)(A)), which states that the biosimilar applicant "shall" provide to the reference product sponsor a copy of its application and also manufacturing information (because it was recognized that patents related to manufacturing might be at issue between the parties). Sandoz contended that despite using the word "shall," Congress did not intend to make these disclosures mandatory because the law also provided remedies for reference product sponsors faced with nondisclosure from the biosimilar applicant. The District Court sided with Sandoz in its interpretation of the law, that these remedy provisions indicate that, taken as a whole, the law does not force the biosimilar applicant to make these disclosures.
Also at issue was interpretation of another provision of the law, that the biosimilar applicant provide 180 day notice to the reference product sponsor that it intended to enter the marketplace (42 U.S.C § 262(l)(8)(A)). Sandoz provided this notice prior to obtaining FDA approval, and the District Court agreed with Sandoz that this notice was effective. Sandoz's biosimilar, under the brand name Zarxio®, obtained FDA approval on March 5, 2015 and under the District Court's interpretation of the statute Sandoz was free to enter the market (an outcome prevented by an injunction granted by the Federal Circuit pending its decision in this appeal).
The Federal Circuit opinion was written by Judge Lourie, who was able to persuade Judge Chen to his point of view regarding the interpretation of whether disclosure of the biosimilar application was mandatory, and Judge Newman to his opinion that the law prevents a biosimilar applicant from giving marketing notice until after FDA approves the application. Each of these judges wrote separate opinions reflecting partial concurrence and partial dissent (which gives both parties a basis for en banc review and, if necessary petitions for certiorari).
In the opinion, after a brief synopsis of the background of statute, its purported purpose and relationship to the Hatch-Waxman Act, and the regulatory framework for approving biologic drugs and biosimilar copies thereof, the Court addressed the facts and the parties' contentions with regard to the "patent dance" provisions of the Act (codified under 42 U.S.C § 262(l) et seq). The first of these was the dispute over whether disclosure of the biosimilar application is mandatory or optional. The opinion sets forth the relevant section of the statute (42 U.S.C § 262(l)(2)(A)):
Not later than 20 days after the Secretary notifies the subsection (k) applicant that the application has been accepted for review, the subsection (k) applicant shall provide to the reference product sponsor a copy of the application submitted to the Secretary under subsection (k), and such other information that describes the process or processes used to manufacture the biological product that is the subject of such application . . . [emphasis in the opinion].
And the "remedial" provisions under (42 U.S.C § 262(l)(9)(C)):
If a subsection (k) applicant fails to provide the application and information required under paragraph (2)(A), the reference product sponsor, but not the subsection (k) applicant, may bring an action under section 2201 of Title 28, for a declaration of infringement, validity, or enforceability of any patent that claims the biological product or a use of the biological product [emphases in the opinion].
And 35 U.S.C. § 271(e)(2)(C)(ii):
It shall be an act of infringement to submit . . . if the applicant for the application fails to provide the application and information required under section 351(l)(2)(A) of such Act, an application seeking approval of a biological product for a patent that could be identified pursuant to section 351(l)(3)(A)(i) of such Act . . . [emphasis in the opinion].
The Court recognized that "read in isolation," "shall" in 42 U.S.C § 262(l)(2)(A) appears to be mandatory: the biosimilar applicant must disclose its application and the relevant manufacturing information within 20 days of acceptance. This reading is also supported, according to the opinion by other sections of the statute that state disclosure is "required" (including 42 U.S.C. § 262(l)(1)(B)(i), (l)(9)(A), (l)(9)(C); 35 U.S.C. § 271(e)(2)(C)(ii))) and in particular section (l)(1)(B)(i):
"When" a subsection (k) applicant submits an aBLA to the FDA, "such applicant shall provide . . . confidential access to the information required to be produced pursuant to paragraph (2) and any other information that the subsection (k) applicant determines, in its sole discretion, to be appropriate" [emphases in opinion].
Ironically, the opinion also states that "under the plain language of paragraph (l)(1)(B)(i), when an applicant chooses the abbreviated pathway for regulatory approval of its biosimilar product, it is required to disclose its aBLA and manufacturing information to the RPS no later than 20 days after the FDA's notification of acceptance, but not when the "when" criterion is not met.
This "plain meaning" interpretation did not prevail, however, the opinion stating that "the 'shall' provision in paragraph (l)(2)(A) cannot be read in isolation." This is because, as Sandoz successfully argued in the District Court, the statute also contains provisions for the reference product sponsor to pursue should the biosimilar applicant fail to comply with the statute (specifically 42 U.S.C. § 262(l)(9)(C) and 35 U.S.C. § 271(e)(2)(C)(ii)). According to the Court, "[t]hose latter provisions indicate that 'shall' in paragraph (l)(2)(A) does not mean 'must.'" Of course, this is on its face a fairly ridiculous form of statutory construction. Using it in any statute containing penalties for non-compliance negates the requirement to comply; while it may be the case that an individual can acquiesce to suffer such penalties it cannot be said in any other context that the existence of the remedies indicates Congress did not intend its statutes to be complied with. The errancy in the Court's interpretation is reinforced in its assertion that "mandating compliance with paragraph (l)(2)(A) in all circumstances would render paragraph (l)(9)(C) and 35 U.S.C. § 271(e)(2)(C)(ii) superfluous" for the same reasons: penalties for non-compliance rarely indicate an intent that statutory provisions are optional, particularly when stated in the imperative.
The opinion goes on in its text and a footnote to indicate a belief that the reference product sponsor is capable of filing an infringement suit on any patent that "could be identified pursuant to [paragraph] (l)(3)(A)(i)" (emphasis in opinion), but fails to recognize that the purpose of the patent dance is to identify that patent or those patents that may be infringed. While in some instances this may be readily apparent, in others it may not, and the Court in rendering this opinion shifts the burden on identifying those patents on the reference product sponsor. This is both impractical and procedurally challenging; indeed, it sets up a situation where the biosimilar applicant can move to dismiss an infringement action based on an allegation that the complaint is insufficient because it has not identified the correct patent(s) (and this is under current pleadings rules, which may be applied more stringently against patentees should any of the current "anti-troll" legislation be enacted into law). Such a situation puts the lie to the blithe reassurance in the opinion that "[o]nce the RPS brings an infringement suit under those two provisions, it can access the required information through discovery."
The regrettable part of the decision is that the Court may be correct that the "only" provision in the statute for non-compliance is a patent infringement suit (which Amgen has brought). But by giving its imprimatur on Sandoz's clever avoidance of the clear mandate of the statute, the Court puts at risk the regime created (wisely or otherwise) by Congress. And the remedy for this error is difficult to contemplate: is Congress expected to revise that law by stating that "when we say shall we really mean it?"
The opinion then moves to the second question, regarding the timing of when the biosimilar applicant must give notice of its intent to market its biosimilar drug. This date is important because it starts a period of 180 days during which even an approved biosimilar cannot enter the marketplace. Sandoz argued (and the District Court agreed) that its notice was effective even though it was sent to Amgen prior to FDA approval of its biosimilar filgrastim drug product. The Federal Circuit disagreed (ironically, in another part of the statute containing provisions that "shall" be complied with); as set forth in 42 U.S.C. § 262(l)(8)(A):
The 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) [emphasis in opinion].
Here, the Court agreed with Amgen, stating that notice can only effectively be given after the biosimilar product has been approved by the FDA, stating that "the statutory language compels such an interpretation. According to the opinion, this is because while in other portions of the statute the biosimilar product is referred to as "the biological product that is the subject of the application," in subsection (l)(8)(A) the statute reads "the biological product licensed under subsection (k)." The change in language indicates to the Court that "[i]f Congress intended paragraph (l)(8)(A) to permit effective notice before the product is licensed, it would have used the 'subject of' language." The Court appreciated that Congress made this distinction at least in part because it is only after licensure that "the product, its therapeutic uses, and its manufacturing processes are fixed," something that even the biosimilar applicant does not know with certainty when it applies for FDA approval. The Court also recognized that "[g]iving notice after FDA licensure, once the scope of the approved license is known and the marketing of the proposed biosimilar product is imminent, allows the RPS to effectively determine whether, and on which patents, to seek a preliminary injunction from the court." This permits "a fully crystallized controversy" between the parties to have arisen when suit is filed, and "provides a defined statutory window during which the court and the parties can fairly assess the parties' rights prior to the launch of the biosimilar product." Interpreting the statute as advanced by Sandoz would, on the contrary, result in a situation where "the RPS would be left to guess the scope of the approved license and when commercial marketing would actually begin." The Court dismissed the argument that Amgen will receive unfairly an additional 180 days of exclusivity as being serendipitous under these particular circumstances (Sandoz having filed its aBLA 23 years after Amgen received market approval) which will not be the usual case.
The effects of the statutory remedies provisions on the Court's interpretation of the BPCIA is evident in its differing interpretations of mandatory statutory language in subsections (l)(2)(A) and (l)(8)(A): in the former the Court decided "shall" did not indicate an intent for the statutory language to be mandatory because there were remedial provisions available in the case of non-compliance. But the Court interpreted "shall" as used in the language of subsection (l)(8)(A) to be mandatory precisely because there were no equivalent remedial provisions in the act if, as here, notice of commercial marketing was given prematurely (or, indeed in other circumstances, not at all).
In this case the Court held that Sandoz had provided effective notice when it notified Amgen on the same day that the FDA approved its biosimilar filgrastim product. Sandoz's biosimilar, under the brand name Zarxio®, obtained FDA approval on March 5, 2015, and under this aspect of the decision will be available for marketing on September 2, 2015.
Having rendered its opinion regarding statutory interpretation, the Court affirmed the District Court's dismissal of Amgen's state law claims (based on its contention that Sandoz violated the BPCIA), vacated the District Court's summary judgment in Sandoz's favor and remanded for the on-going patent infringement litigation to proceed. It may indicate a certain uncertainty in the Court's position (or in its confidence that Sandoz would comply) that, having decided that Sandoz did not have the right to market its biosimilar product under the notice provisions of the BPCIA until September 2, 2015, the Court nevertheless extended its injunction prohibiting Sandoz from doing just that.
Judge Newman concurred with the Court's interpretation of the statutory notice provisions but dissented on the question of whether the aBLA disclosure requirement was mandatory. In her view, Sandoz's non-compliance with these provisions was a "deliberate violation" of the BPCIA which should result in Sandoz "forfeit[ing] access to the benefits of the BPCIA" (specifically, using the aBLA pathway for rapid approval of its biosimilar filgrastim product). She finds express support for the proposition that when Congress uses the word "shall" they tend to mean it, citing Alabama v. Bozeman for the proposition that "[t]he word 'shall' is ordinarily the language of command," 533 U.S. 146, 153 (2001). She finds the Court's opinion to misapprehend the statutory regime, inter alia, because it omits remedies for non-compliance with the disclosure requirements with regard to claims to manufacturing processes, which she understands were expressly contemplated by Congress and are of particular importance to Amgen in the case at bar. She also recognizes the pleadings problems that may arise under the Court's interpretation of the statute. And she believes that the Court's opinion upsets the balance created in the statute between reference product sponsor and biosimilar applicant, and will permit the biosimilar applicant to reap the benefits of the abbreviated approval pathway under subsection (k) while avoiding the patent provisions under subsection (l). For her there is no uncertainty regarding Congressional intent and thus she dissented from this portion of the court's opinion.
Judge Chen, in his partial concurrence and partial dissent, is concerned with another aspect of the statutory regime, that of the 12-year exclusivity period. For him, the Court's opinion gives Amgen another 180 days of exclusivity that is outside the 12-year exclusivity term and thus should not be permitted (because it gives Amgen "an extra-statutory exclusivity windfall"). He would use the same "interpretation in context" approach used by the Court in interpreting subsection (l)(2)(A) for interpreting subsection (l)(8)(A) and thus find that a biosimilar applicant could give notice of intent to market prior to obtaining FDA approval of its biosimilar product. Stated in statutory construction terms, Judge Chen believes that subsection (l)(8)(A) becomes a nullity when, as here, the biosimilar applicant has not complied with subsection (l)(2)(A)'s provisions. This is because he views the provisions of subsection (l)(8)(A) to be intended to give the reference product sponsor time to obtain an injunction when the other provisions have been complied with and, as a result, the reference product sponsor has not been able to assert all its patents prior to biosimilar product launch. He states in this regard his opinion that "[t]he interwoven structure of subsection (l) indicates that Congress viewed the procedures of (l)(8) as inseverable from the preceding steps in (l)."
In a telling footnote in the majority opinion, Judge Lourie quoted Winston Churchill's famous aphorism that Russia was "a riddle wrapped in a mystery inside an enigma" to explain his appreciation of the BPCIA. He noted that in this opinion the Court has done its "best to unravel the riddle, solve the mystery, and comprehend the enigma." While the patent dance provisions of the law are undoubtedly complicated, this view of the task of statutory construction of the BPCIA only reinforces the feeling that maybe Judge Woods was correct when she suggested that perhaps it was time to let other circuit courts "make the big mistake" in interpreting patent law.
Amgen v. Sandoz (Fed. Cir. 2015)
Panel: Circuit Judges Newman, Lourie, and Chen
Opinion for the court by Circuit Judge Lourie; opinion concurring in part and dissenting in part by Circuit Judge Newman; opinion dissenting in part by Circuit Judge Chen