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Biosimilar makers prevail at Federal Circuit in state pre-emption case


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Biosimilar makers prevail at Federal Circuit in state pre-emption case

Drug innovators cannot use state laws to force biosimilar makers through injunctions to disclose details about their products, the U.S. Court of Appeals for the Federal Circuit said in a new ruling, declaring federal law pre-empts such activities.

The Dec. 14 ruling was a major victory for Novartis AG unit Sandoz Inc. and companies like it that make biosimilars, which are intended to be lower-cost versions of biologics — large molecules derived from natural sources, such as micro-organisms or plant or animal cells.

But the decision was another blow to Sandoz's rival Amgen Inc., which brought the initial lawsuit in 2014.

The Federal Circuit's decision was another affirmation of the Biologics Price Competition and Innovation Act, or BPCIA, a complex law enacted in 2010 as part of the Affordable Care Act that gave the U.S. Food and Drug Administration the authority to use a streamlined approach to approve biosimilars. It also established a complicated process for resolving patent disputes — described by one federal judge as "a riddle wrapped in a mystery inside an enigma."

The Supreme Court in June ruled that biosimilar manufacturers were not required to wait six months after gaining FDA approval before entering the U.S. market. The high court also said biosimilar companies cannot be forced under federal law through an injunction to engage in disclosure and negotiation procedures to share a copy of their marketing applications and manufacturing details with brand-name companies — a process dubbed the patent dance.

But the Supreme Court asked the Federal Circuit to re-examine on remand whether brand-name drugmakers could seek state law injunctions to compel biosimilar companies to engage in the patent dance and disclose their documents.

"State laws never pre-empt federal law, but sometimes the two can coexist," explained William Jay, a partner at Goodwin Procter and co-chair of the law firm's appellate litigation practice and head of litigation in Washington.

The question before the Federal Circuit was whether a state law remedy could coexist with the federal BPCIA statute that created the patent dance.

"The court concluded that it could not because biosimilar patent litigation and the steps that precede it are a matter of federal law that Congress has thoroughly regulated," Jay told S&P Global Market Intelligence. "Congress didn't create an injunctive remedy or any other remedy besides the ability to file a patent lawsuit, and so it's not permissible for the state to glom on their own remedies on top of the federal framework."

The Supreme Court called on the Federal Circuit to decide the matter because neither the appeals court in its previous decision nor the district court had addressed pre-emption on the merits.

"They felt it was important to provide a definitive answer to the pre-emption question," Jay said. "They decided it on the federal pre-emption grounds rather than the state law grounds because this is an authoritative answer that isn't going to come out differently if the next biologic manufacturer sued in New Mexico, Nebraska or New York. They provided a single nationwide answer that resolves the question."

Washington lawyer Jaime Santos, an associate in Goodwin's appellate litigation practice, also noted that it was important that the court not only decided the case on conflict pre-emption but also field pre-emption.

Under field pre-emption, state law is pre-empted where it regulates conduct in a field that Congress intended the federal government to occupy exclusively. Conflict pre-emption occurs where it is impossible for a private party to comply with both state and federal requirements, or where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.

"The fact that they relied on field pre-emption is really significant, because it means that in every future case in every state not only can the states not provide additional remedies, like Amgen has argued that California did here, but they also can't add new substantive requirements for any type of biosimilar information exchange or patent litigation or anything along those lines," Santos said in an interview. "So that proactively addresses what states can and can't do. And the answer here is they can't really do anything in this field at all."

Some uncertainties remain

While the Federal Circuit's Dec. 14 ruling provided more clarity about the BPCIA and confidence for innovators and biosimilar makers planning their patent litigation strategies, some uncertainties remain.

Currently being litigated is the question of what particular obligations biosimilar applicants have in disclosing information under the BPCIA's patent dance, said New York lawyer Robert Cerwinski, a partner in Goodwin's intellectual property litigation group.

For instance, innovators are disputing with biosimilar applicants over whether the latter companies are only required to disclose their applications to the brand-name drugmakers or if additional manufacturing information is mandated outside of what is already contained in those documents, and if so, the scope of those disclosures, Cerwinski said.

Under the BPCIA procedures, the parties may exchange lists of patents for which they believe a claim of infringement could reasonably be asserted by the innovator, as well as their respective positions on infringement, validity and enforceability of those patents.

"The reference product sponsors have often taken the position that they're entitled to detailed discovery before having to give their binding list," Cerwinski said. "But it is a little bit of an unsettled issue among the various interested parties."

Another unresolved matter is the conditions under which the biosimilar applicant can file a declaratory judgment or if the innovator always controls the venue for litigation, he said.

As for Amgen and Sandoz, their court battles rage on over the validity and enforcement of one patent on the innovator's drug Neupogen — the medicine that started the fight between the two companies.

Sandoz won approval in March 2015 of its biosimilar of Neupogen, dubbed Zarxio. It was the first biosimilar to gain the FDA's nod. Since then, the agency has approved eight more biosimilars, although only three are currently on the market, while the others are tied up in patent litigation.