On December 14, 2017, the U.S. Court of Appeals for the Federal Circuit (the “Federal Circuit”), in a unanimous opinion, ruled in favor of Sandoz in Sandoz Inc. v. Amgen Inc., when it prevented reference product sponsors from using state laws to punish biosimilar manufactures for not disclosing information about they biosimilar products. The Federal Circuit’s decision is a victory for biosimilar manufacturers who now have fewer obstacles to overcome in reaching the market. At issue in the lawsuit was whether Amgen could use state laws, namely California’s unfair competition law, to force Sandoz to disclose its manufacturing information under the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”).
As a way of background, the BPCIA was passed on March 23, 2010 by Congress as part of the Affordable Care Act to provide an expedited approval pathway for biosimilars. In addition to expediting FDA approval of biosimilar products, the BPCIA provides a means of resolving patent disputes between reference product sponsors and biosimilar applicants earlier in the drug development process. The BPCIA sets forth several requirements for biosimilar applications, with the most litigated requirement being that of the “Patent Dance.”
Sandoz v. Amgen is the pioneer case for interpreting the Patent Dance. This case involved the drug filgrastim, a biologic used to stimulate the production of white blood cells. Amgen claims to hold patents on the manufacture and use of filgrastim, which it sells under the name Neupogen®. Sandoz, the biosimilar applicant, filed an application with the FDA seeking approval of a filgrastim biosimilar, Zarxio®.
In June 2017, the Supreme Court ruled, in part, that the only federal remedy available to the reference product sponsor when a biosimilar applicant fails to disclose its biosimilar application and manufacturing information is to bring a declaratory judgment action for patent infringement. The Supreme Court noted that “[t]he BPCIA’s carefully crafted and detailed enforcement scheme provides strong evidence that Congress did not intend to authorize other remedies that it simply forgot to incorporate expressly.” The Supreme Court, however, did not rule out the possibility that an injunction might still be available under state law. For its state law claim to be successful, Amgen would have to show that Sandoz’s failure to share its biosimilar application and follow 42 U.S.C. §262(l)(2)(A) of the BPCIA is “unlawful” under California’s unfair competition law.
In the eagerly-awaited decision in the remand of Amgen v. Sandoz from the U.S. Supreme Court, the Federal Circuit unsurprisingly held that Amgen’s state law claims “are preempted on both field and conflict grounds.” To this end, the court noted that patents are “inherently federal in character” because a patent “originates from, is governed by, and terminates according to federal law.” The Federal Circuit thus found that Congress “fully occupied” the field of biosimilar litigation through its creation of the BPCIA and as a result, state laws must give way to federal laws. While the decision does not address specifics of California law, it does seem to foreclose any attempts to enforce BPCIA provisions on state law grounds.
The Federal Circuit’s decision is a win for biosimilar manufacturers because it reduces some of the obstacles faced by biosimilars in reaching the market. In fact, Sandoz called the ruling “an important win for patient access to life-changing medication.” Not only does the ruling streamline the Patent Dance process by reducing potential state law claims, it also eliminates the possible uncertainty that could have been created as a result of having different state remedies being applied. The Federal Circuit acknowledged that concern, writing that “compliance with the BPCIA’s detailed regulatory regime in the shadow of 50 states’ tort regimes and unfair competition standards could dramatically increase the burdens on biosimilar applicants.”
For reference product sponsors, on the other hand, the decision may act to discourage sponsors from engaging in the Patent Dance. By removing the possibility of seeking state law remedies, including damages or an injunction, sponsors may not be able to compel biosimilar applicants to disclose critical manufacturing information that may be needed to determine whether infringement occurred. As a result, sponsors are left with the only recourse available to them under federal law, which is to sue -- a very costly and timely endeavor. Thus, the Federal Circuit may have removed a very important incentive for sponsors to dance. Nevertheless, there may be other factors -- including the potential profitability of the biosimilar, the strength and number of patents protecting the innovator product, and the patent term remaining on the innovator product -- that determine whether a sponsor wants to engage in the Patent Dance so it will be important to monitor how companies manage their strategies when it comes to the BPCIA.
On November 13, 2017, the U.S. Court of Appeals for the Federal Circuit upheld the District Court verdict in Amgen v. Apotex (Amgen v. Apotex, No. 2017-1010, slip op. at 3 (Fed. Cir. Nov. 13, 2017), in which the court ruled that the commercial marketing of Apotex's proposed biosimilar versions of Amgen's Neulasta® and Neupogen® do not infringe Amgen's U.S. Patent No. 8952,138 (the '138 patent). The claims of the ‘183 patent are directed to a method of refolding recombinant proteins expressed in non-mammalian cells. At the center of the dispute was whether information provided during the information exchange process of the “Patent Dance” pursuant to 42 U.S.C. § 262(Ɩ)(3) can later be used as evidence during a District Court patent infringement litigation.
The '138 patent is generally directed to a method of refolding misfolded proteins, known as "inclusion bodies,” expressed in non-mammalian cells. Claim 1 of the '138 patent recites a "refold mixture" and specific protein concentrations that the District Court interpreted as a high protein concentration "at or above 1 g/L." As part of the Patent Dance, Apotex stated in several "pre-litigation letters” that it did not infringe Amgen's '138 patent because the relevant inclusion body concentration in its product was limited to 0.9-1.4 g/L. Apotex's abbreviated Biologics License Application, or aBLA, also identified the relevant inclusion body concentration in its product to be in the range of 0.9-1.4 g/L. During the infringement trial, however, Apotex's fact witness testified that the "pre-litigation letters" were "factually inaccurate," and Apotex presented two batch records showing the protein concentration in its "refold mixture" never exceeded 0.56 g/L. Based on this new evidence, the District Court sided with Apotex and found that Amgen had failed to prove direct infringement of the '138 patent.
On appeal to the Federal Circuit, Amgen argued that the District Court erred, in part, in finding that Apotex's "pre-litigation letters" lacked probative value.
On this issue, the Federal Circuit found that the District Court properly considered the statements in the "pre-litigation letters" and properly found that they lacked probative value in light of the other evidence presented at trial. The Federal Circuit also noted that Amgen did not present any evidence to contradict the statements from Apotex's fact witness, and furthermore, did not attempt to challenge the accuracy of the witness's testimony. In its decision, the Federal Circuit clarified that statements made in the "pre-litigation letters" are party admissions and therefore have some probative value.
The Federal Circuit’s decision underlines the importance of statements made during the Patent Dance and their potential use in a subsequent patent infringement litigation. Parties on both sides should be careful of what they say during the Patent Dance exchange because, as clarified by the Court in this decision, such statements are treated as party admission. These statements therefore carry probative weight and must be considered in view of other evidence presented at trial. This decision also further emphasizes the importance of fact witness testimony and other evidence to support arguments regarding infringement. To this end, the parties in a biosimilars patent infringement litigation should be prepared to rebut or support these statements with their own expert witness testimony and other intrinsic and/or extrinsic evidence.
On Monday, November 27, 2017, the Supreme Court heard arguments in Oil States vs. Greene’s Energy Group, et al. (No. 16-172 S.Ct., Supreme Court 2017), a case challenging the constitutionality of the U.S. Patent and Trademark Office’s (USPTO) post-grant patent review proceeding, known as inter partes review (IPR). A decision in this case by the Supreme Court will have important ramifications for both patent holders and third-party petitioners alike and could change how patent disputes are litigated in the United States.
IPR challenges have become a popular and effective way by which third parties can challenge issued patents. The IPR proceeding was enacted on September 16, 2012 as part of the America Invents Act (AIA) and allows a third party to challenge the patentability of an issued patent based on prior art under 35 U.S.C. §§ 102 and 103. The proceeding takes place in front of the USPTO Patent Trial and Appeals Board (PTAB) and a final decision can generally be obtained within eighteen months. The popularity of IPR challenges stems from the PTAB’s record of invalidating numerous patent claims. In about 1,733 final decisions from January 2017 through August 2017, the PTAB cancelled all or part of a patent around 80 percent of the time, earning the PTAB the moniker patent “death squad”, a term first coined by Randall Rader, the former chief judge of the U.S. Court of Appeals for the Federal Circuit. Further enhancing their popularity, third party petitioners have quickly realized the various benefits to IPR challenges over protracted litigation in District Court, namely that IPRs are cheaper, quicker, and more effective at invalidating patents than challenging the patents of competitors in district court.
Despite their popularity, IPRs are not without controversy. Not surprisingly, some patent holders call the IPR proceedings a threat to innovation. Larger patent stakeholders, such as Allergan PLC, have even resorted to creative and unusual lengths to avoid having their patents subject to an IPR. Thus, the desire to find constitutional fault within the IPR framework is just as high as the popularity of IPR proceedings with third party petitioners.
At the center of this dichotomy of opposing interests is the Oil States dispute, where the question of the constitutionality of IPR proceedings takes center stage. Specifically, Oil States asks whether IPRs violate the U.S. Constitution by extinguishing private property rights through a non-Article III forum without a jury. In challenging the constitutionality of IPRs, Oil States argued that patents are private property and therefore can be revoked only by a federal court, where the standard for overturning a patent is higher than in the IPR proceeding. From this viewpoint, Oil States contends that the administrative procedures controlling IPR proceedings violate the U.S. Constitution’s right to be heard by a federal court and jury. This argument finds basis in the 1898 Supreme Court decision in McCormick Harvesting Mach. Co. V. Aultman & Co., 169 U.S. 606 (1898), wherein the Supreme Court held that once a patent is granted it “is not subject to be revoked or canceled by the president, or any other officer of the Government” because “[i]t has become the property of the patentee, and as such is entitled to the same legal protection as other property.”
During oral arguments held on November 27, 2017, three of the court’s liberal justices including Ruth Bader Ginsburg, Elena Kagan, and Sonia Sotomayor appeared sympathetic toward the review process, noting that the USPTO must have the power to invalidate wrongly issued patents after they have granted.
Conservative justices including John Roberts and Neil Gorsuch raised concerns that the government might be able to revoke patents too easily. Justice Gorsuch, in particular, noted that judicial review is available only if someone appeals the PTAB’s decision, which does not always happen.
The ultimate decision in the case will have important ramifications for both patent holders and third-party petitioners alike and could also change how patent disputes are litigated in the U.S. If the Court rules that IPRs are unconstitutional, striking down laws and regulations implementing the IPR practice, then there will be many questions about the status of the patent claims that have already been challenged, whether they were cancelled or amended, through an IPR. If the Court upholds IPRs as being constitutional, on the other hand, patent holders may face even more challenges to their patents as third parties will continue to view the IPR process as an effective and efficient means of challenging patents without going down the more time and cost consuming litigation route. Moreover, upholding the constitutionality of IPRs will undoubtedly bring into question the overall value of US patents with respect to the patent rights issued by other countries since there exists no other similarly robust and effective means of invalidating issued patents abroad. Ultimately the constitutionality of IPR proceedings could have important ramifications to the US economy in general, which has become heavily dependent on innovation and protection of innovation rights.
We will continue to monitor this lawsuit. A decision will likely be issued in June 2018.
BioPharma Law Blog posts updates and analyses on IP topics, FDA regulatory issues, emerging legal developments, and other news in the constantly evolving world of biotech, pharma, and medical devices.