Sandoz, Amgen, and the Federal Government at the Supreme Court -- Timing of BPCIA 180-Day Notice of Commercial Marketing Provisions

By Kevin E. Noonan --

Yesterday, the Supreme Court heard oral arguments in Sandoz Inc. v. Amgen Inc. from Sandoz counsel (Deanne E. Maynard), Amgen counsel (Seth P. Waxman), and presenting the opinion of the United States, an Assistant to the Solicitor General, U.S. Department of Justice (Anthony A. Yang).  A synopsis of the arguments made by the parties and the government on the first question, whether a biosimilar applicant is required to provide the reference product sponsor ("RPS") with its abbreviated biologics license application ("aBLA") and related manufacturing information in order to take advantage of the abbreviated approval process, was posted yesterday (see "Supreme Court Hears Oral Argument in Sandoz v. Amgen -- Patent Dancing and Missing Puzzle Pieces").  This post is concerned with the second question before the Court:  whether the 180-day notice of commercial marketing can be given before FDA approval.  Each party was granted 25 minutes of argument, reflecting the Justices' appreciation of the complexities of the issues; the government got 20 minutes.

The Court peppered counsel for Sandoz, the government, and Amgen about the practical consequences of deciding when and whether suit could be brought under the statute.  There was little discussion about the big "policy" issues other than what Congress had intended to do, and both parties made representations on how likely vel non some of the hypotheticals could be.

Justice Kennedy led off the questioning, asking when does biosimilar licensure occur?  The answer was important regarding the question (developed later in the argument) of when a reference product sponsor would know what the FDA had licensed the biosimilar applicant to sell; at one point with regard to timing of FDA approval Justice Kennedy asked:  "I mean, do they get a phone call?  They say, hey, good news, we've got it approved, but in five years, we're going to be able to market."  Following this line of questions Justice Sotomayor said, "I'm just trying to get the process down."  The Justice in this regard then asked whether there could be an announcement by FDA about intent to approve?  In response, Sandoz counsel stated that FDA has said its desire was to approve in 10 months, but reminded the Court that there is no tentative approval mechanism in the statute.

Justice Breyer voiced an opinion that what was missing was what the FDA thought, saying at one point that without agency input he was "stuck".  He specifically asked Sandoz counsel "What does this notice say?" and "Now, how could you do that if you don't know what the product licensed is?", calling this "a crucial ambiguity" in the statute.

Justice Sotomayor then questioned whether all the sources of information about the biosimilar Sandoz cited in their brief will "tell [the RPS] exactly what [the biosimilar applicant] is intending to market," and whether, under those circumstances, the RPS can file a proper complaint?  In her answer, Sandoz counsel said that "[i]t's the application, just like in Hatch-Waxman, that crystallizes the controversy."  But both Sandoz and Amgen mentioned to the Court that in this instance, Sandoz did not give Amgen its aBLA (although it did get the aBLA in discovery after filing suit).  Later in this argument, Sandoz voiced the belief that a RPS could file a good faith complaint, but the Chief Justice seemed skeptical:

But it doesn't know the specifics of the biosimilar.  I mean, by definition, the biosimilar is similar; it's not identical.  And whether or not it infringes might have something to do with the ways in which it is different.

Well, you're suing saying, this thing infringes our patent.  We don't even know what "this thing" is.

That's the problem; right?  What would the patent litigation look like?  I have this patent; you're bringing this biosimilar; I'm going to sue you.  The litigation would decide whether the biosimilar infringes the patent, and that would have something to do with whether or not it's sufficiently -- whether it's too similar or whether it's certainly distinct.

There was also discussion from most of the Justices about how the patent dance provisions and the declaratory judgment provisions interacted.  Justice Breyer in particular seemed skeptical of this interpretation ("The system that was supposed to set up a -- a system, where you've put tremendous incentives on people to negotiate and to work it out in an orderly way, that you can just gut it by simply filing your commercial notice on day 2?").

The Court (in questions from Justices Breyer and Sotomayor) seemed to appreciate Amgen's argument regarding notice prior to approval being deficient because what is approved is not known beforehand; Sandoz countered that the RPS's biologic drug provides that information but that argument did not seem to be persuasive to Chief Justice Roberts, who emphasized that the molecule was similar and but identical and thus without knowing what was approved, the RPS couldn't have the information needed to file a DJ action.

Most of the questions for the government related to preemption, with the Chief voicing concerns about the question not being briefed and the consequences if the states were not preempted.  The government focused on what occurred below (with the state court action being mooted) while the Court wanted to know how the state and Federal systems would interact, seeing the possibility of independent state action as a way to make the Federal statute (and their opinion) a nullity.  The Chief Justice said:

And in terms of the preemption question, it seems to me that it's very hard to give a comprehensive answer to the questions presented without considering whether, well, thanks for your opinion on what Federal law does, but, in fact, State law, you can get the same injunction.  It's really asking us to put together a puzzle where a big piece is missing.

And Justice Sotomayor said:

[A]ssuming, just an assumption for the sake of argument, that we rule in your favor and say, as you've asked us to say, that a declaratory judgment is the -- that -­- the only remedy available, and there is no Federal injunction that's possible here, do we vacate and remand for the court below to decide whether State law provides [an alternative remedy]?

Justice Breyer stated his concern that permitting the biosimilar applicant to make its notice prematurely could upset the regulatory scheme:

And so all we have to do is, number 1, day 1, they give the Section (2) notice, send them all the information.  On day 2, they give the commercial notice, and all of a sudden everybody is free to give declaratory judgments.

The system that was supposed to set up a -- a system, where you've put tremendous incentives on people to negotiate and to work it out in an orderly way, that you can just gut it by simply filing your commercial notice on day 2?

The Court's ease with Amgen's counsel, Seth Waxman, was evident (as was his with the Court), also evidenced by Mr. Waxman including in his argument the Court's decision in Bates v. Dow Agrosciences, which he lost.  Mr. Waxman concentrated on his "'shall' means 'shall'" argument when he was allowed to, emphasizing the uncertainty regarding what was approved (prior to approval) due to biosimilarity.  But Justice Sotomayor asked the following question on the consequences of ruling in Amgen's favor:

I got your position, which is that they have to give notice after the FDA approval, correct?  Wouldn't that stop Phase 2 litigation from starting immediately?  By your definition, they could go the biosimilar and the license product could go all through round 1.  They've now narrowed their dispute.  I thought round 2 involved disputes about other patents, not the ones that they narrowed.  And so wouldn't your reading always force round 2 into the post-license 12-year period?  I thought the whole purpose of the statute was to get round 1 and round 2 done and done before the 12-year period was finished.

Addressing Sandoz and amici's most compelling policy argument, Mr. Waxman contended that the "extra" 180 exclusivity period hadn't occurred yet because all the biosimilars currently in development were long past this 12-year period, and that the FDA could grant tentative approval if that were to become a problem in future.  He contrasted the Hatch-Waxman situation -- where what is licensed is known -- with biosimilars based on complexity argument:

I think, Justice Sotomayor, with respect to your question about how soon this can be done -- that (8)(a) notice, first and foremost, allows the sponsor, for the very first time, to seek a preliminary injunction against the commercial marketing of the product for the uses using the processes.

And you cannot go to a Federal district court and ask for a preliminary injunction until you know, A, that there's an imminency that occurs.  You can't go years in advance.  B, you have to know what it is that you are seeking to enjoin.  This notion that there's some artificial act of infringement that relates to whatever you may or may not know is in the original application for Article III purposes is irrelevant.

Mr. Waxman countered Sandoz (and the government's) argument regarding the relationship between the requirements and the remedies in the statute:

The notion that (9)(B) is a remedy for the failure to provide 180-day notice is -- crazy.  The -- what (8)(A) says is, you can't file a declaratory judgment action until you get the notice.  And what they say is, well, but the remedy of not giving notice is that you can file a declaratory judgment action.  And not only that, you can file a declaratory judgment action and you must file a declaratory judgment action at a time when you don't know when, if ever, the FDA will approve, what it will approve, or for what purposes and by what means.  And if there is a violation of the 180-day notice period, the first time that the -- the sponsor is going to know about it is when the FDA approves.

But Justice Gorsuch challenged Mr. Waxman that "[i]f you say the notice itself is defective, apart from when it's given, because it doesn't provide enough information, isn't that a possible remedy right there?" and Mr. Waxman replied that:

In an instance in which -- the notice simply says we are going to begin commercial marketing in 180 -- no less than 180 days.  Our -- the -- you know, the issue in this case is -- the substantive issue -- I'll leave aside the enforcement question -- is that's not notice.  In order to notice something, you can't provide notice of something when you don't even know it's going to happen.  That is, notice ordinarily and, for that matter, logically implies that the preconditions that are outside your control have been satisfied.

Justice Kagan seemed unconvinced by the argument, saying "[b]ut I guess what I'm saying is that it seems as though this statute contemplates that you can do a lot of this process prior to the approval, but that's not a necessary piece of information you need in order to start evaluating whether there's infringement."  Mr. Waxman's rejoinder mentioned the potential for differences between what is contained in a biosimilar applicant's application and what the FDA finally approved:

If it turns out that when the FDA issues its license, it's licensed something materially different than what the application was, the parties and -- and the district court have to have some opportunity to say, wait a minute, I mean we adjudicated patent infringement on the assumption that the manufacturing process would be X, Y, and Z, but the FDA didn't approve it.  They insisted on A, B, and C, and there has to be some period -- and that's what the 180 days does -- to allow the parties to say even with respect to the phase I patents, we now have a real dispute.

Justice Sotomayor seemed unconvinced there was unfairness to the RPS, but in reply Mr. Waxman said "everybody needs some time to be able to figure out whether your hypothesis is right, which is that what the FDA has approved is narrower than what the application was, not broader.  And all that the 180-day period does is give us, the referenced product sponsor, an opportunity to figure that out."

The Justices questioned Sandoz and the government more persistently than they questioned Mr. Waxman but the Court was actively involved with all Justices except Justices Thomas and Alito posing questions and new Associate Justice Gorsuch being an active questioner of both the government and Mr. Waxman.

The Court's questioning created the clear impression that the Justices understood the significance of the issues they were asked to decide, and convinced that the statute was Byzantine in its complexity (albeit not rising to the level of Judge Lourie's Churchillian analog to Russia).  It also illustrated that the Justices (and their clerks, presumably) would review the arguments in the briefs after the argument and wanted to focus only on those aspects they felt were either unclear (in this case, giving them a wealth of opportunity) or that would have the most immediate practical effect.  Tealeaf reading of Supreme Court arguments is always fraught with uncertainty, but in this case all that can honestly be said is that the Court has its work cut out for it.

Comments

[EG]

Hey Kevin,

Like Andrew's post on the "patent dance," your post on "when does biosimilar marking start" portion of this oral argument is excellent and thorough. Calling the biosimilar provisions of the ACA Byzantine in its complexity" is an understatement-the oral argument just underscores the lousy job Congress did in drafting this portion of the ACA specifically and the ACA generally.

[Atari Man]

Over at the scotusblog, John Duffy speculates that this case might be dismissed as improvidently granted. http://www.scotusblog.com/2017/04/argument-analysis-supreme-court-struggles-acas-patent-provisions/#more-255371