Analysis: Federal Circuit Split Decision in Amgen v. Sandoz

Amgen v. Sandoz (filgrastim)  •  Approved Biosimilar Products  •  Biosimilar News  •  BPCIA and Related U.S. Statutes  •  Patent Dance

The Federal Circuit issued a split decision on the appeal in Amgen v. Sandoz today, July 21, 2015.

As we’ve covered in previous posts (here, here, and here), the questions at issue in Amgen v. Sandoz were:

  1. Whether a subsection (k) (biosimilar) applicant “may elect not to disclose its [abbreviated biologic licensing application (“aBLA”)] and…manufacturing information under 42 U.S.C. § 262(l)(2)(A), subject only to the consequences set forth in § 262(l)(9)(C).” Op. 10.
  1. Whether a subsection (k) applicant “may satisfy its obligation to give notice of commercial marketing under 42 U.S.C. § 262(l)(8)(A) by doing so before the FDA licenses its product,” and whether such notice is “mandatory.” Op. 15, 19.

As we anticipated in our analysis of the oral argument, Sandoz won with its interpretation of the first issue: an applicant can choose between disclosing its (k) application and manufacturing information, or not disclosing such information and instead facing immediate infringement action from the reference product sponsor (“RPS”).  Amgen won on the notice issue: notice of commercial marketing can be given only after FDA approval of the biosimilar product.

Judge Lourie wrote the majority (2-1) opinion for the Court, holding that the information disclosure provisions are not “mandatory,” and that if a biosimilar applicant opts not to provide information according to the (l)(2)(A) provision, the reference product sponsor’s only remedy is to file an immediate action of infringement.  On the notice provision issue, the Court held that notice of commercial marketing is mandatory if the applicant opts out of the patent dance disclosure steps, and that such notice can be given only after FDA licensure of the biosimilar product.

Judge Newman wrote an opinion concurring with the Court’s opinion on the notice issue, and dissenting from the Court’s opinion on the information disclosure question, arguing instead that the information disclosure provisions are a mandatory part of the BPCIA’s statutory scheme.

Judge Chen also wrote a separate opinion, dissenting as to the Court’s interpretation of the notice provision, and arguing instead that the notice provision is not mandatory, in that the RPS’s sole remedy for an applicant’s failure to comply with the notice provision is to bring an immediate action for patent infringement as provided for in (l)(9) and 35 U.S.C. § 271(e)(2)(C)(ii).

Question 1.

On the first issue of whether an applicant must disclose its aBLA and manufacturing information within 20 days of FDA’s notification of acceptance of the aBLA, the Federal Circuit (2-1) concluded that although the “shall” provision in (l)(2)(A), on its own, “appears to mean that a subsection (k) applicant is required to disclose its aBLA and manufacturing information to the RPS by the deadline specified in the statute,” (emphasis added), this provision “cannot be read in isolation”: “In other provisions, the BPCIA explicitly contemplates that a subsection (k) applicant might fail to disclose the required information by the statutory deadline.” Op. 12.  Thus, although the plain language of the “shall” provision itself might support Amgen’s reading of the statute, other provisions in the BPCIA and in 35 U.S.C. § 271(e)(2)(C)(ii) “indicate that ‘shall’…does not mean ‘must.’” Op. 13.

The Court concluded that there is thus no “procedural right to compel compliance with the disclosure requirement of paragraph (l)(2)(A),” Op. 13, and that, as Sandoz argued, if an applicant “fails” to comply with the disclosure requirements, the BPCIA expressly provides the sole remedies to redress such failure: i.e., the RPS may bring an immediate action for infringement under (l)(9)(C) and 35 U.S.C. § 271(e)(2)(C)(ii).  Amgen’s position—that the BPCIA mandates compliance with the disclosure provisions—would render these other provisions “superfluous,” contrary to established canons of statutory interpretation.

Therefore, the Court concluded, “[b]ecause Sandoz took a path expressly contemplated by the BPCIA, it did not violate the BPCIA by not disclosing its aBLA and the manufacturing information by the statutory deadline.” Op. 15.

Question 2.

On the second issue of when a biosimilar applicant can provide effective notice of commercial marketing, the Court (2-1) sided with Amgen, and held that “a subsection (k) applicant may only give effective notice of commercial marketing after the FDA has licensed its product.” Op. 16 (emphasis added).

The Court adopted Amgen’s reasoning from the language of the statute, giving determinative weight to Congress’s use of the phrase “biological product licensed under subsection (k),” (emphasis added) in the notice provision instead of the phrase “the biological product that is the subject of” the biosimilar application, used elsewhere in the statute.

Judge Lourie’s opinion reasoned that notice after licensure makes more legislative sense, because only after licensure is the scope of the approved license known, the manufacturing processes fixed, and the marketing of the biosimilar product imminent.  Requiring notice of commercial marketing to be given after licensure, the majority opinion explains, “ensures the existence of a fully crystallized controversy regarding the need for injunctive relief.”  Op. 17.  If, per Sandoz’s argument, the statute were interpreted to allow commercial marketing at any time before FDA licensure, the RPS might be unable to seek a preliminary injunction as contemplated by the statute: “the RPS would be left to guess the scope of the approved license and when commercial marketing would actually begin.” Op. 17.

Although the majority opinion recognized Sandoz’s concern that a post-licensure notice requirement could effectively extend the twelve-year exclusivity period afforded to reference products under the BPCIA, it found that concern unavailing: although under the facts of this case Amgen would have an additional 180 days of market exclusivity, “[t]hat extra 180 days will not likely be the usual case, as aBLAs will often be filed during the 12-year exclusivity period for other products.” Op. 18.

The Court also addressed the question of whether the “shall” language in the (l)(8)A) notice provision renders that provision mandatory.  Unlike the disclosure provision of (l)(2)(A), the Court concluded that “shall” in the notice provision is indeed mandatory.  The critical difference, the Court explained, is that whereas the disclosure provision of (l)(2)(A) corresponds to other provisions that expressly specify the consequences for failure to comply with that disclosure step, the (l)(8)(A) notice provision lacks any corresponding provision that contemplates non-compliance with that step or provides any consequence for failure to provide notice.

Although, as Sandoz noted, (l)(9)(B) provides that the RPS may bring a declaratory judgment action for failure to comply with certain patent dance steps including the notice provision, that provision applies only after the applicant has already complied with the disclosure provisions of (l)(2)(A); if an applicant opts out of the disclosure provisions, the Court held, it must provide notice of commercial marketing in accordance with (l)(8)(A).  In this case, therefore, only Sandoz’s post-licensure notice of commercial marketing was effective under the BPCIA.  The Court consequently extended the injunction pending appeal through September 2, 2015.

Amgen’s State Law Claims

Amgen’s state law claims were predicated on its claims that Sandoz violated the BPCIA by failing to provide information in accordance with (l)(2)(A) and providing insufficient notice under (l)(8)(A).  Because the Court (1) held that Sandoz did not violate the BPCIA and (2) extended the injunction pending appeal to comply with the Court’s ruling on the notice provision of the BPCIA, the Court affirmed the district court’s dismissal of Amgen’s unfair competition and conversion claims.

Judge Newman’s Opinion

Judge Newman concurred with the Court’s opinion as to the notice provision, but dissented with respect to the information disclosure issue.  Judge Newman argued that the “shall” language that the Court found mandatory with respect to the notice provision should hold the same meaning for the disclosure provision as well.

The disclosure provision in (l)(2)(A), Judge Newman wrote, triggers the “designated exchange of information [that] is fundamental to the BPCIA purposes of efficient resolution of patent issues,” Op. 5, and the consequence for non-compliance provided in (l)(9)(C) does not change the plain mandatory “shall” language in (l)(2)(A).  Subparagraph (l)(9)(C) provides only for declaratory action by an RPS on product and use claims; it does not enable action on manufacturing process patents, which are especially critical in biosimilars litigation.

In support of her position, Judge Newman also drew on legislative history to show that the balance struck by the drafters of the BPCIA requires compliance with the disclosure provisions in order to “avert and…expedite litigation.” Op. 6.

Judge Chen’s Opinion

In a sort of mirror-image to Judge Newman’s opinion, Judge Chen’s opinion adopted the majority opinion as to the information disclosure provisions, but argued that the reasoning applicable to those provisions should apply in equal measure to the notice provision to construe the notice provision as non-mandatory and subject only to the consequences laid out in (l)(9) and 35 U.S.C. § 271(e)(2)(C)(ii).

Judge Chen argued that just as the information disclosure provision in (l)(2)(A) cannot be read in isolation, neither should the notice provision of (l)(8)(A) be read as a standalone provision: (l)(8) should be read as simply another step in the rest of the patent dance, each step of which is contingent on the preceding step. This means that if the applicant fails to take the first step in (l)(2)(A), as Sandoz did here, the rest of the patent dance provisions “cease to matter.”  Op. 2.  At that point, Judge Chen wrote, “the RPS’s course of action is clearly defined in (l)(9) and § 271(e)(2)(C)(ii): the unfettered right to immediately pursue patent infringement litigation unconstrained by any of the timing controls or limits on the number of patents it may assert that would result from the (l)(2)– (l)(8) process.” Op. 2.

The notice provision, Judge Chen reasoned, “express[ly] assum[es]” that the parties have already engaged in the preceding patent dance steps:  “the entirety of (l)(8), including (l)(8)(A)’s notice provision, serves to ensure that an RPS will be able to assert all relevant patents before the (k) applicant launches its biosimilar product.” Op. 6.  The “interwoven structure” of all the steps provided in subsection (l) of the BPCIA “indicates that Congress viewed the procedures of (l)(8) as inseverable from the preceding steps in (l),” Op. 7: if the parties have not engaged in the steps prior to (l)(8), then (l)(8) is not even triggered.

The majority opinion’s interpretation of the notice provision, Judge Chen added, erroneously grants Amgen “an extra-statutory exclusivity windfall,” Op. 2, and in practice “provides an inherent right to an automatic 180-day injunction.” Op. 9.  This cannot be what Congress intended, Judge Chen reasoned, because “[i]f Congress intended to create a 180-day automatic stay it understood how to do so” by clearer means. Op. 9.  Moreover, Judge Chen added, under the majority opinion, this “automatic stay” would apply only if the applicant does not comply with the disclosure provisions—if the applicant does comply with the provisions, then it can refuse to provide notice subject to the consequences in (l)(9)(B): the RPS can immediately file suit on patents listed during the dance.  Judge Chen concluded that this “uncomfortable result,” in which the provision is interpreted differently based on the (k) applicant’s actions, is not supported by the statute as a whole.

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