Sandoz Inc. v. Amgen Inc. (2017)

By Kevin E. Noonan and Andrew Williams --

Earlier today, the Supreme Court handed down its opinion in Sandoz Inc. v. Amgen Inc., marking the first time the Court has interpreted the Biologics Price Competition and Innovation Act ("BPCIA") for the approval of biosimilar drugs.  The Court described the statute as "a carefully calibrated scheme for preparing to adjudicate, and then adjudicating, claims of infringement" related to biosimilar applications.  This process begins with the disclosure by the biosimilar applicant of the aBLA and related information in order to "enable the sponsor to evaluate the biosimilar for possible infringement of patents it holds on the reference product . . . ."  Nevertheless, the Court held that the reference product sponsor ("RPS") cannot seek enforcement of the disclosure provision in 42 U.S.C. § 262(l)(2)(A) by injunction under federal law.  This was essentially the result reached by Federal Circuit.  However, the Supreme Court reversed and remanded the question whether the disclosure provision was enforceable under state law, or whether the BPCIA pre-empted any state law claim.  With regard to the 180-day notice-of-commercial-marketing provision of the statute, the Court reversed the Federal Circuit and held that the notice may be provided "either before or after receiving FDA approval."

As background, for those who have not being paying close attention for the past three years, in 2014, Sandoz became the first company to file a BLA pursuant to the BPCIA's abbreviated pathway found at 42 U.S.C. § 262(k).  This application was for approval to market a biosimilar version of Amgen's NEUPOGEN^® (filgrastrim) biologic drug product.  NEUPOGEN^® is a 175 amino acid recombinant methionyl human granulocyte colony-stimulating factor (r-metHuG-CSF), and is often prescribed for cancer patients on chemotherapy at times when they are at most risk of infection because their white blood cell count is low.  However, despite availing itself of this pathway for FDA approval, Sandoz refused to participate in the patent resolution component (the disclosure and information exchange provisions, also known affectionately as the "patent dance"), alleging that it was not a mandatory component.  Amgen responded by filing suit on October 24, 2014, requesting in part a preliminary injunction to prevent Sandoz from entering the market before the issues can be resolved by the Court.  United States District Judge Seeborg of the Northern District of California denied Amgen's motion, ruling that the disclosure and notice provisions of the BPCIA were not mandatory.  And, in a seriously fractured decision, the Federal Circuit agreed (see "Federal Circuit Decides Amgen v. Sandoz (in an opinion that will make neither party happy)").

Patent Dance

The first question considered by the Court was:

Is an Applicant required by 42 U.S.C. § 262(l)(2)(A) to provide the Sponsor with a copy of its biologics license application and related manufacturing information, which the statute says the Applicant "shall provide," and, where an Applicant fails to provide that required information, is the Sponsor's sole recourse to commence a declaratory-judgment action under 42 U.S.C. § 262(l)(9)(C) and/or a patent-infringement action under 35 U.S.C. § 271(e)(2)(C)(ii)?

However, the Court essentially sidestepped the question of whether "shall" means "shall" and instead held that an RPS cannot seek enforcement of this section by injunction under federal law.  The Supreme Court essentially agreed with the Federal Circuit that the BPCIA provides the exclusive federal remedy for failure to disclose the required information by authorizing an RPS to bring an immediate declaratory-judgement action.

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.

42 U.S.C. § 262(l)(9)(C).

The Supreme Court continued, however, by concluding that the Federal Circuit erred in relying on 35 U.S.C. § 271(e)(4) as precluding state law remedies.  As the Supreme Court explained, failure to disclose the aBLA and related information is not part of the artificial act of infringement established in § 271(e)(2)(c):

It shall be an act of infringement to submit—

i) with respect to a patent that is identified in the list of patents described in section 351(l)(3) of the Public Health Service Act (including as provided under section 351(l)(7) of such Act), an application seeking approval of a biological product, or

(ii) 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,

if the purpose of such submission is to obtain approval under such Act to engage in the commercial manufacture, use, or sale of a drug, veterinary biological product, or biological product claimed in a patent or the use of which is claimed in a patent before the expiration of such patent.

35 U.S.C. § 271 (e)(2)(c).  As the Court put it: "The flaw in the Federal Circuit's reasoning is that Sandoz's failure to disclose its application and manufacturing information was not an act of artificial infringement, and thus was not remediable under § 271(e)(4)."  Instead, the artificial infringement is the act of submitting the application.  The language in the statute regarding noncompliance with § 262(l)(2)(A) is not an element of infringement, but rather "merely assists in identifying which patents will be the subject of the artificial infringement suit."  As a result, the exclusive remedies outlined in § 271(e)(4) for this artificial infringement do not apply.  Instead, the Supreme Court remanded this issue back to the Federal Circuit to determine whether an injunction is available under state law to enforce § 262(l)(2)(A), or whether state law enforcement is preempted by BPCIA.  If the Federal Circuit does determine that state-law remedies are pre-empted, biosimilar applicants will be able to continue withholding information required by the BPCIA without threat of enforcement of that provision.

Notice of Commercial Marketing

The second question before the Court was whether a biosimilar applicant could give the 180-day Notice of Commercial Marketing prior to FDA approval, or whether such notice would not be effective until FDA approval (as the Federal Circuit held below).  This question was related to interpretation of another part of the statute, 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].

Sandoz had 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 on appeal).  The Federal Circuit had agreed with Amgen that notice could only effectively be given after the biosimilar product has been approved by the FDA.  According to the Federal Circuit, 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 indicated to the Federal Circuit 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 appellate 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.  In addition, "[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."

Sandoz presented this question to the Court in its certiorari petition:

Whether notice of commercial marketing given before FDA approval can be effective and whether, in any event, treating Section 262(l)(8)(A) as a stand-alone requirement and creating an injunctive remedy that delays all biosimilars by 180 days after approval is improper.

The Supreme Court reversed.  The Court's analysis regarding the 180-day notice provisions of the statute was straightforward.  The Court held that the Federal Circuit had misinterpreted the statutory language by imposing a requirement for FDA approval before proper notice could be given.  According to the opinion, the reference in the statute to a licensed biosimilar product was to the term "commercial marketing" not "notice," and thus just imposed the requirement that a product be licensed before it is marketed.  With this interpretation the notice was not tied to a product having been licensed before notice was given, as the Federal Circuit had held, but to the unremarkable reality that the product had to be licensed before it was sold.  The Supreme Court found only one timing requirement in the statute, that notice must be provided 180 days prior to marketing the biosimilar product.  The opinion recognized the Federal Circuit opinion to contain a second timing requirement, that FDA had approved the biosimilar.  This second requirement was not in the statute according to the Court and hence requiring approval was a misinterpretation of the statutory language by the Federal Circuit.  This conclusion was supported for the Court by the structure of subsection §262(l)(8)(B) ("After receiving notice under subparagraph (A) and before such date of the first commercial marketing of such biological product, the reference product sponsor may seek a preliminary injunction" (emphasis added)).  According to the opinion, Congress would have used this structure in its language for §262(l)(8)(A) if it intended the provision to have the interpretation applied by the Federal Circuit.

Outside this question of statutory interpretation, the Court identified the policy arguments raised by the parties and the government, and refused to be persuaded by the plausible contentions set forth therein.  Rather, the Court recommended that Congress is the appropriate body for making these policy distinctions and advised the parties to go there to effect a change in the law.

Justice Breyer filed a brief concurring opinion, directed to his concerns (voiced during oral argument) that Congress had delegated to FDA responsibility for interpreting the statute, based in part on its greater expertise.  The Justice thus invited the agency to "depart from, or to modify, today's interpretation" under the appropriate circumstance, citing National Cable & Telecommunications Assn. v. Brand X Internet Services, 545 U. S. 967, 982–984 (2005), to support his interpretation of the agency's authority in this regard.

Sandoz Inc. v. Amgen Inc. (2017)
Opinion of the Court by Justice Thomas; concurring opinion by Justice Breyer

Comments

[EG]

"The BPCIA sets forth a carefully calibrated scheme for preparing to adjudicate, and then adjudicating, claims of infringement."

Hey Kevin,

What a bunch of malarkey, as the perplexed SCOTUS Justices showed in the oral argument transcript. The BPCIA was certainly not "carefully" drafted and as could be expected from our virulently anti-patent Judicial Mount Olympus, all doubts in it were resolved against the patent owner-what a surprise! (And yes, I'm being very sarcastic.)

[Connor]

I really don't remember much about preemption from law school, but I don't understand why "the Supreme Court remanded this issue back to the Federal Circuit to determine whether an injunction is available under state law to enforce § 262(l)(2)(A), or whether state law enforcement is preempted by BPCIA." Since all of the BPCIA is federal law, how could an injunction be available under state law to enforce any of it?

[Kevin E Noonan]

My understanding is that California's unfair competition law could (as in, perhaps not, is able to) be used to obtain an injunction against Sandoz. Whether or not this is the case is what the Court remanded to the Federal Circuit to determine.