On Monday, October 22, 208, the US Court of Appeals for the Federal Circuit issued another blow to Allergan’s deal with the Saint Regis Mohawk Tribe (“Tribe”) by refusing to reconsider an earlier decision that rejected use of tribal sovereign immunity in inter partes reviews (IPRs). This is the latest setback for Allergan and the Tribe in their efforts to avoid IPRs before the Patent Trial and Appeals Board (“PTAB”).
As a general background, in September 2017, Allergan announced that they entered into an agreement with the Saint Regis Mohawk Tribe (the Tribe) in which Allergan transferred ownership of all Orange Book-listed patents for RESTASIS® (Cyclosporine Ophthalmic Emulsion) 0.05% to the Tribe, while being granted exclusive licenses in the patents related to the product. The patents transferred to the Tribe included U.S. Patent Nos. 8,629,111; 8,633,162; 8,642,556; 8,648,048; 8,685,930 and 9,248,191. RESTASIS® is an important product for Allergan since it generated around $1.5 billion in 2017. By transferring ownership of the RESTASIS® patent portfolio to the Tribe, Allergan and the Tribe hoped to dismiss the ongoing IPRs of the RESTASIS® patents based on the Tribe’s status of being a recognized sovereign tribal government to which sovereign immunity applies.
Thus far, however, Allergan’s strategy to avoid IPR challenges has faced significant hurdles. In February 2018, the PTAB rejected the attempt to dismiss based on tribal sovereign immunity, finding that Allergan retained ownership in the patents and the Tribe retained nothing more an “illusory or superficial right” to sue for infringement of the challenged patents. According to the PTAB, “[i]n view of the recognised differences between the state sovereign immunity and tribal immunity doctrines, and the lack of statutory authority or controlling precedent for the specific issue before us, we decline the tribe’s invitation to hold for the first time that the doctrine of tribal immunity should be applied in IPR proceedings.”
In July 2018, the Federal Circuit upheld the PTAB’s decision, concluding that tribal sovereign immunity cannot be asserted in IPRs, and therefore cannot be used to dismiss the IPRs filed against Allergan.
A month later, in August 2018, Allergan and the Tribe requested a panel rehearing and an en banc rehearing. This request was denied on Monday.
Despite the recent denial, Allergan and the Tribe can still appeal to the U.S. Supreme Court.
Allergan’s controversial move to circumvent IPRs in an effort to stave off generic drug entry adds fuel to the ongoing debate over IPR proceedings. We will keep you informed of developments related to IPRs as they occur.
On October 10, 2018 President Trump signed into law the “Patient Right to Know Drug Prices Act” (S.2554) which requires antitrust scrutiny of biosimilar settlements by the Federal Trade Commission (FTC). The law amends the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 to require Reference Product Sponsors and biosimilar applications to submit their settlement agreements to the FTC for review. The bill was introduced in March 2018 by Senators Susan Collins (R-Maine), Clair McCaskill (D-Missouri), and Debbie Stabenow (D-Michigan).
The new law will allow the FTC to access the terms of a deal without seeking additional authority from the commission. It will also allow the FTC to track biosimilar deals and develop a data record of relevant terms, similar to what has been down with small molecule generics.
The law comes at an important time. Humira®, which is the best-selling drug in the world yielding more than $18 billion in sales in 2017, entered the market in Europe this past Tuesday on October 16, 2018. However, no biosimilars of Humira® are expected to enter the market in the US until at least 2023. This is because in the US, AbbVie not only maintains a robust patent portfolio protecting Humira®, it has also reached deals with multiple biosimilar manufacturers, including Amgen, Samsung Bioepis, Mylan, Sandoz, and as of yesterday, Fresenius Kabi, to hold off competition until 2023.
Apart from this new law, other legislations addressing settlement agreements are also moving forward in Congress. It will be interesting to see if these legislations will increase the entry of biosimilars on the US market.
We will keep you informed of any new developments in this field.
It has been one year since the Federal Circuit issued its opinion in Amgen v. Sanofi that raised the hurdle for protecting antibody inventions by requiring more data when disclosing and claiming antibodies. Since the court decision on October 5, 2017, it has become more challenging for pharmaceutical companies to obtain broad protections for therapeutic monoclonal antibodies. While obtaining protection for antibodies is still very much possible in this current climate, certain types of claims are now more susceptible to attack and possible invalidation. Below we analyze the different types of claims protecting antibody inventions and discuss their relative strengths in the wake of Sanofi.
In Amgen v. Sanofi, the Federal Circuit ruled that in order to obtain broad patent coverage for a class of antibodies that bind to a particular antigen and perform a particular function, companies must disclose a sufficient number of representative antibodies across the claimed genus or establish a clear relationship between the function of the antibody and the genus of the antibody in their specification. In Sanofi, the claims were directed to a monoclonal antibody that bound to one or more of 15 different amino acid residues on the sequence of the target antigen and performed a certain function (e.g., blocked the antigen from binding to its target). Claim 1 of U.S. Patent No. 8,829,165 ("'165 patent") is representative. It recites:
“An isolated monoclonal antibody, wherein, when bound to PCSK9, the monoclonal antibody binds to at least one of the following residues: S153, I154, P155, R194, D238, A239, I369, S372, D374, C375, T377, C378, F379, V380, or S381 of SEQ ID NO:3, and wherein the monoclonal antibody blocks binding of PCSK9 to LDL[-]R.”
To support its claim that antibodies that bound one of the 15 residues or any combination of them were covered by the patent, Amgen disclosed two specific antibodies with binding data and affinity data. These data probably would have been sufficient prior to Sanofi. In Sanofi, however, the Federal Circuit ruled that such disclosure was insufficient. The court noted that patent specifications must disclose a representative number of species of the genus of claimed antibodies in order satisfy the written description requirement. The Federal Circuit did not, however, provide any guidance as to what a “representative number” of species would be. Therefore, it still remains an open question as to what counts as a representative number of species remains today.
Below we review several types of antibody-related claims in search of trends on which types of claims have fared better than others in the last year.
Historically, one of the broadest types of claims a company could get to an antibody was by its function. Functional claims to a genus of antibodies typically recite the functional property of an antibody without reciting any sequence information, for example “an antibody that binds to target Y”. Similarly, functional claims can be in the form of competition claims where “an antibody that competes with antibody X for binding to antigen Y” is covered. While such broad claims can cover nearly any antibody in a group of antibody products that are directed to the same target, such functional claims are becoming increasingly vulnerable in light of Sanofi, as courts will require a “representative number” of examples of the genus, i.e. a representative number of antibody sequences and associated binding data.
Method of Use/Treatment
Method of use or method of treatment claims have also proven to be vulnerable as these types of claims have not fared well when challenged in an Inter Partes Review (IPR) at the PTAB. These types of claims are by far the most popular target of IPR petitioners. In a study of antibody-related IPR petitions, the IPR petition grant rate on method of treatment claims is 65% (24 petitions granted, 13 denied), but, in all 6 of the Final Written Decisions to date, all instituted claims were held unpatentable. Therefore, it appears that if the PTAB institutes an IPR on a method of treatment antibody claim, those claims are likely to be found unpatentable. One potential reason for why these types of claims are easy to invalidate is because if you knew the antigen and what it does, it would be obvious to develop an antibody to treat people against that antigen. As such, method of use and method of treatment claims are probably the weakest types of claims in protecting antibodies.
On the opposite side are sequence claims. These types of claims define an antibody by its structure, which is most commonly claimed by its six complementary determining regions (CDRs), by its two variable regions, or even by its heavy and light chain sequences (both cDNA and peptide sequences). Patent prosecutors keen on obtaining the most protection for clients will attempt to claim sequences by the shortest and fewest number of sequences possible. Often times the amount of sequence data needed to pass examination hurdles will depend on the examiner. These types of claims will likely survive invalidation attempts because they are specific to one particular antibody. However, while antibody sequence claims are a strong type of claim to have, they are also the narrowest option, which makes them easier for a competitor to design around.
Besides claiming the antibody itself, a company can claim a pharmaceutical composition or formulation. While these types of claims are theoretically easier to design around because they include the antibody structure, they appear to be successful in surviving IPR challenges at the PTAB. In fact, the PTAB rarely institutes challenges to composition claims, and when it has, the claims almost always survive. Antibody formulation claims are the second most frequently challenged type of antibody claim behind method of treatment claims, discussed above. However, of the 13 IPRs that have been filed against claims to antibody formulations, three were instituted and 10 were denied. In the three instituted IPRs, all of the claims survived the challenge. Of the IPR petitions that were denied, most were because the petitioner failed to establish “a reasonable likelihood that the petitioner would prevail.” It is likely that these types of claims survive challenges because there is high unpredictability in the art since even small changes in antibody formulations can have unexpected effects on protein aggregation, viscosity, and other factors, making it harder to prove that such formulations are predictable and obvious. As such, pharmaceutical formulation patent are important to include when deciding how to protect antibodies.
A final type of patent for protecting an antibody is to develop antibody conjugates. These types of claims describe an antibody with a particular sequence fused to, or conjugated to, a drug. In an IPR challenge to Kadcyla®, an antibody-drug conjugate consisting of the monoclonal antibody trastuzumab, Herceptin®, linked to the cytotoxic agent emtansine, the PTAB ultimately upheld the claims because a person skilled in the art at the time of the invention would have expected Herceptin®-maytansinoid immunoconjugates to be unacceptably toxic. While claims to antibody conjugates may survive obviousness challenges, it is important to remember that they are also narrower because they describe both the antibody sequence and a drug. They will also likely face challenges as to how much data and support is required to be in the specification to broadly claim the antibody conjugate. Nevertheless, these types of claims may be valuable to an antibody patent portfolio.
The case law in the antibody space has made it more challenging for companies to obtain broad protections for therapeutic monoclonal antibodies, especially in the wake of the Sanofi decision. To maximize the value of your antibody portfolio, it is therefore important to review the antibodies on a case-by-case basis and decide which features to claim based on the amount of data and investment available.
Brand companies employ a variety of mechanisms to maintain their market exclusivity and delay generic entry. We have recently written about Johnson & Johnson’s rebate and bundling schemes in trying to hinder uptake of a Remicade® biosimilar. We have also written about Allergan’s attempts to sell its patents covering Restasis® to an Indian tribe in an effort to avoid inter partes review challenges. Well, Allergan again finds itself again in the middle of a dispute that touches on intellectual property, this time Allergan is alleged to have engaged in anticompetitive practices to delay generic competition because of its misuse of citizen petitions.
While citizen petitions are supposed to allow citizens an opportunity to raise legitimate safety concerns with the U.S. Food and Drug Administration (FDA), they have often been misused by innovator drug companies as a way of delaying generic market approval. One study analyzed all citizen petitions filed with the FDA between 2011 and 2015 that targeted pending generic drugs and found that innovator manufacturers file 92% of all the citizen petitions, with the FDA denying nearly all these petitions.
This situation arose recently in a class action case filed against Allergan Inc. alleging antitrust violations aimed at protecting its dry-eye drug Restasis®. Amongst other violations, the suit alleged that Allergan filed four baseless citizen petitions in an effort to hinder generic competition. Allergan filed a motion to dismiss this claim asserting that the suit was “meritless”.
Last week, however, U.S. District Judge Nina Gershon shot down Allergan’s efforts to sidestep the suit and sided with plaintiff union benefit plans and various pharmaceutical purchasers, claiming that it is probable that Allergan acted dishonestly in hindering generic competition.
In its ruling, the Federal judge declined to apply the Noerr-Pennington doctrine, which shields good-faith petitioning of the government even if it results in a competitive edge. She provided two reasons for not applying the doctrine.
First, Judge Gershon noted that the doctrine does not protect “objectively baseless” petitioning. Since the FDA denied each of Allergan’s petitions, the Judge found that it could be probably that the petitions were scientifically unfounded.
Second, Judge Gershon noted that that the doctrine does not protect actions that are solely intended to hinder competition. Since Allergan petitioned the FDA repeatedly asking for testing of generic Restasis® in human, something not required for generic drugs, and then did not appeal the FDA’s rejections of its petitions but instead filed subsequent petitions using duplicative motives, the Judge found that Allergan’s actions could show that Allergan filed the petitions with improper motives. According to Judge Gershon, “[i]t is highly plausible that a company willing to engage in such conduct was intending to delay the entry of generics into the market, rather than seeking to protect the public health.”
Citizen petitions are a legally protected act so attacking them under antitrust law has traditionally been difficult. To prove that a citizen petition violates the law, plaintiffs have to show they are so baseless that they constitute a total sham. This case shows that its is possible to clear the first hurdle in demonstrating that citizen petitions are a sham and thus shows a possible path forward for generic drug plaintiffs hit with such petitions in future disputes.
I recently spoke at a biosimilars conference in Boston, MA and one topic that came up multiple times is the antitrust issue relating to Remicade®. I reviewed the recent decision involving Remicade® and its biosimilar, Inflectra®, to see if the court provided any insights into how antitrust issues dealing with biosimilars, particularly those involving “exclusionary contracts” and rebates, will be addressed.
On August 10, 2018, the Pennsylvania Court denied Johnson & Johnson’s (“J&J”) motion to dismiss Pfizer’s antitrust lawsuit relating to its Remicade® biosimilar, Inflectra®. We previously wrote how Pfizer sued J&J in the U.S. District Court for the Eastern District of Pennsylvania in September 2017 alleging that J&J has been conducting “anti-competitive practices” to prevent biosimilar competition by effectively preventing health insurers, hospitals, and clinics from offering Pfizer's lower-priced biosimilar product. According to Pfizer, J&J forced hospitals and insurers to enter exclusive arrangements and bundled rebate programs to ensure that Remicade® was given preferential treatment over Inflectra®.
J&J moved to dismiss the lawsuit, but on August 10, the Court denied Janssen’s motion and is allowing the antitrust suit, the first lawsuit of its kind in the biosimilar field, to continue. In it’s ruling, the Court provides insights as to how some antitrust issues relating to biosimilar market entry may be analyzed.
First, the Court addressed the issue of exclusionary agreements. In Pfizer’s lawsuit, Pfizer alleged that J&J forced hospitals and insurers to enter exclusive arrangements to exclude biosimilars other than Remicade® from coverage under their plans, thereby making Remicade® the exclusive infliximab available to patients covered by that plan. These exclusionary agreements are particularly important in the context biologics. Remicade® and Inflectra®, like most biologics, are administered intravenously at a clinic or hosptial. They are a “medical benefit” product, rather than a “pharmacy benefit” product, which means they must be stocked in advance by providers, rather than directly purchased by patients on an as-needed basis. Since the providers bear the financial risk of reimbursement, there is an incentive for them to stock the drug that will actually be covered by most insurers.
J&J tried to argue that there is no correlation between Inflectra’s® poor market traction and sales and J&J’s exclusionary contracts with insurers and providers and pointed to a number of alternative theories to explain the marked difference in sales between the two products. In particular, J&J argued that the lack of commercial success of Inflectra® was independent of J&J’s exclusionary agreements, and instead were due to provider’s lack of comfort with biosimilars, Inflectra's® status as a “biosimilar” rather than as an “interchangeable”, and Remicade’s® cost-effectiveness.
In the end, the Court dismissed J&J’s argument that Pfizer needed to disprove all of their alternate theories of why sales of its product were lagging at this stage of litigation. By holding that Pfizer was not required to disprove all other theories on a motion to dismiss, the Court left open the possibility that J&J, or a future innovator, could exonerate itself using one or more of these alternate theories. That is an important takeaway because it suggests that even though J&J’s actions could lead to antitrust liability, i.e., by entering into exclusionary contracts, it also provided ways to avoid such liability.
Bundled Rebates and Multi-Product Bundling Programs
Second, the Court addressed the issue of bundled rebates and multi-product bundling programs. In one instance, Pfizer alleged that J&J introduced a rebate program that would provide savings off Remicade®’s increasing list price for all existing Remicade® patients, which would, in effect, bundle the base of existing Remicade® patients with new patients entering the infliximab market. To this end, the Court held that bundled rebates can be anticompetitive when they preclude competition for new infliximab patients by being linked to noncontestable (existing) patients. This, of course, assumes that new patients are contestable because they are not anchored to a product while existing patients are incontestable because they are anchored to a product. Under this reasoning, the Court found that J&J’s rebate program could be anticompetitive since it “bundled its power over existing Remicade patients to break the competitive mechanism and deprive new infliximab patients (and their insurers) of the ability to make a meaningful choice between Remicade and its biosimilars.” The Court, therefore, refused to dismiss Pfizer’s bundling claim. Since most biologics have legacy patients, this factor may be relevant to future rebate schemes. Specifically, this shows that rebate schemes may be tailored by innovators to potentially exclude non-competitive products and avoid antitrust liability
Additionally, Pfizer alleged that J&J bundled rebates across multiple products to force insurers to grant exclusivity to Remicade® or pay higher prices on other J&J products. J&J argued that this claim should be dismissed because Pfizer failed to offer its own multi-product bundles. The Court appears to have sided with J&J on this issue and held that bundling rebates across multiple products is not, per se, an antitrust violation. The Court noted that Pfizer was not a single-product company and therefore had the capacity to offer such bundles itself. This seems to suggest that whether or not rebates schemes are permissible will depend, in part, on who the biosimilar competitor actually is.
Companies developing innovator and biosimilar products, alike, should be aware of the outcomes of this dispute. At least one United States District Court has found that certain pricing tactics may rise to the level of impermissible monopolization. The outcome of this case will likely provide more insights on which pricing practices are permissible under antitrust laws and which are not.
We will continue to monitor the case and provide updates as they become available.
The Massachusetts Legislature passed non-compete reform in the final days of the 2018 session which will take effect on October 1, 2018. A non-compete clause, or covenant not to compete, is a clause under which one party (usually an employee) agrees not to enter into or start a similar profession or trade in competition against another party (usually the employer). The purpose of these clauses is to protect employers against an employee who may exploit confidential information, trade secrets, or sensitive information, such as customer/client lists, business practices, etc., to gain a competitive edge when working for a competitor or starting a business. These types of clauses are sometimes referred to as "restrictive covenants."
Massachusetts has long debated non-compete reform. This reform will not only affect biotech and pharma employers in Boston, but other employers in Massachusetts as well. While employers will still be able to use non-compete agreements for most workers under the new law, employers will have to adopt a new approach to drafting, implementing, and enforcing these agreements. Some key components of the new law, known as “An Act relative to the judicial enforcement of noncompetition agreements,” (the “Act”) are provided below:
Employer need to pay during the restricted period: The Act requires employers to pay employees “garden leave pay” or some “other mutually-agreed upon consideration” during the restricted period. The Act imposes no specific requirements on the value or timing of any “other” consideration the employer and employee may agree upon as an alternative to garden leave.
The new law only applies to agreements entered into on or after October 1, 2018: Older agreements are not voided, but employers should consider revisiting the existing agreements and determining whether they should be updated or amended.
Continued employment is not sufficient consideration: Employers must provide “fair and reasonable consideration independent from the continuation of employment.” Therefore, for non-compete agreements signed after employment has commenced, continued employment is not sufficient consideration.
Non-competes must be reasonably tailored to protect a legitimate business interest: The Act recognizes three “legitimate business interests”: (a) the employer’s trade secrets; (b) the employer’s confidential information that otherwise would not qualify as a trade secret; and (c) the employer’s goodwill. Under the Act, the non-compete covenant will be presumed to satisfy this element if the employer can demonstrate that no other type of restrictive covenant (e.g., a non-solicitation or non-disclosure covenant) would be sufficient to protect the legitimate business interest at issue.
Non-competes must be limited in duration and geographical scope: Non-competes cannot last more than one year and must be limited to the area where the employee actually worked or had a material presence in the prior two years.
Non-competes include both employees and independent contractors: Under the Act, the definition of a covered “employee” includes independent contractors.
Not all employees are covered by the Act: Employers cannot enforce non-competes for non-exempt employees, college or graduate students, short-term employees, or anyone under the age of 18.
Non-competes may not always be enforceable: If an employee is terminated without cause, a non-compete will be void.
The new law does not apply to all agreements with restrictive covenants: The law does not cover certain types of agreements, including non-solicitation, non-disclosure, and certain separation agreements. These agreements will continue to be analyzed under Massachusetts common law, but now against the backdrop of the new public policy on non-compete restrictions.
The new non-compete law has wide-ranging legal and practical implications for employers in Boston and Massachusetts in general. Employers will now have to evaluate their overall non-compete strategy and human resources processes to ensure compliance with the new law. Moreover, employers will have to review their existing non-compete agreements and update their agreements, if necessary, to ensure compliance. Given the stakes involved, and how widely applicable it is, disputes over the new law will likely take place. We will keep you updated on any developments.
Federal Circuit Affirms PTAB Finding That UC's and Broad's Foundational CRISPR Technologies Are "Patentably Distinct"
On September 10, 2018, the U.S. Court of Appeals for the Federal Circuit (CAFC), in University of California v. Broad Institute, Inc., affirmed the Patent Trial and Appeal Board’s (PTAB) earlier determination that there was no interference-in-fact between the University of California’s (UC) patents and those owned by the Broad Institute, MIT, and Harvard (collectively “Broad”), directed to CRISPR-Cas9 technology. In so doing, the CAFC upheld the PTAB’s underlying finding that, “given the differences between eukaryotic and prokaryotic systems, a person of ordinary skill in the art would not have had a reasonable expectation of success in applying the CRISPR-Cas9 system in eukaryotes.”
In general, CRISPR-Cas9 is a targeted DNA-cutting system that occurs naturally in prokaryotes, and which has been used to edit the DNA of eukaryotic cells in recent years. In August 2012, UC published an article demonstrating that the CRISPR-Cas9 system could be used in vitro, i.e. in a non-cellular experimental environment. Within a few months of UC’s publication, several groups, including Broad, independently applied CRISPR-Cas9 in eukaryotic cells. Broad’s researchers described the use of CRISPR-Cas9 in a human cell line in a published article in February 2013. Both UC and Broad sought patent protection for their respective CRISPR-Cas9 technologies. Whereas UC filed its patent application with claims directed to methods of cleaving DNA using CRISPR-Cas9 without reference to a specific cell type or environment, Broad filed its patent applications with claims limited to the use of CRISPR-Cas9 in eukaryotic cells.
To determine whether the CRISPR-Cas9 claims of UC and Broad were “patentably indistinct,” and which party was the first to invent the claimed technology, the PTAB instituted an interference proceeding under pre-AIA 35 U.S.C. § 102(g) (since the applications were filed before enactment of the AIA). When determining whether claims are “patentably distinct,” the PTAB asks whether the subject matter of a claim of one party, if prior art, would have rendered obvious (or anticipated) the subject matter of a claim of the opposing party.
In examining the claims of UC and Broad the PTAB determined that no interference-in-fact existed because UC’s claim would not have rendered obvious or anticipated Broad’s claims. Broad provided extensive expert testimony about the differences between prokaryotic and eukaryotic systems and how those differences rendered the application of the CRISPR-Cas9 system in eukaryotic cells unpredictable. Moreover, Broad presented statements from UC inventors acknowledging doubts and frustrations about engineering CRISPR-Cas9 systems to function in eukaryotic cells and noting the significance of Broad’s success. Finally, the PTAB found that the developments of other gene editing systems were not particularly informative in assessing the reasonable expectation of success of CRISPR-Cas9 in plant and animal cells. In light of all this evidence, the CAFC concluded “that the Board’s fact finding as to a lack of reasonable expectation of success is supported by substantial evidence.”
In upholding the PTAB’s ruling, the CAFC rejected UC’s arguments that simultaneous inventions may serve as evidence of obviousness: “[t]he fact that six research groups succeeded in applying [CRISPR-Cas] in eukaryotic cells within a short period of time after [UC’s disclosure] is certainly strong evidence that there was a motivation to combine the prior art in this manner.” While the PTAB recognized UC’s evidence of simultaneous invention in this context, it concluded such evidence pointed to a motivation to combine the prior art references but not ‘necessarily’ an expectation of success. The CAFC thus affirmed the PTAB’s finding, but noted that the decision is limited to “the scope of two sets of applied-for claims,” and “is not a ruling on the validity of either set of claims.”
The decision has important implications for the CRISPR-Cas9 patent landscape as it upholds both UC’s and Broad’s patent claims to this foundational and potentially game-changing technology. Third parties that are active in the field may thus have to seek a license from both groups if they want to commercialize this technology. Moreover, since the intellectual property landscape of the CRISPR-Cas9 is so intertwined, even UC and Broad may have to cross-license the technology between themselves to continue research. While the CAFC’s affirmation of the PTAB’s earlier decision seems to provide a modicum of clarity to this complex landscape for those waiting on the sidelines to capitalize on the discovery, given the financial stakes involved and the flexibility of this technology, it is likely that further disputes over the foundational CRISPR-Cas9 innovation will likely continue for some time into the foreseeable future.
We will continue to monitor trends and disputes involving CRISPR-Cas systems and provide updates.
Abbvie’s agreements with biosimilar manufactures to keep their biosimilar versions of Humira® off the market may soon be the subject of a review by the US Federal Trade Commission (FTC).
As we previously wrote, Abbvie entered into at least two settlement agreements with manufacturers to keep biosimilar versions of Humira off the market. In April 2018, it was announced that Abbvie entered into a settlement agreement with Samsung Bioepis that would delay the U.S. launch of Samsung Bioepis’ biosimilar version of Humira® (adalimumab) until June 30, 2023. This is the second such settlement agreement that Abbvie entered into related to the its blockbuster rheumatoid arthritis drug. In September 2017, Abbvie also entered into an agreement with Amgen that would delay the U.S. launch of Amgen’s biosimilar product until January 31, 2023, several months earlier than the Samsung Bioepis’ biosimilar.
It now appears that the Federal Trade Commission, or FTC, may be getting involved in reviewing the settlement agreements for violation of anticompetitive rules. Such settlement agreements, also known as "reverse payment" or "pay-for-delay" settlement agreements, have been common between brand and generic small molecule drug makers and have long been the center of dispute between drug companies and the FTC, ultimately resulting in the US Supreme Court's decision in FTC v. Actavis in 2013. Such settlement agreements are ones in which a drug company, usually the brand company, pays another company, usually the generic drug manufacturer, to stay out of the market, thus avoiding generic competition and a patent validity challenge. In Actavis, the US Supreme Court held that the FTC could make an antitrust challenge under the “rule of reason” against a settlement agreement rather than allowing the FTC to establish a rule that such agreements were presumptively illegal.
In contrast to the small molecule space, FTC review of settlement agreements in the biosimilar space is new territory. However, two Senators, Charles Grassley (R-IA) and Claire Klobucher (D-MN), think the FTC should review the Humira® settlement agreements and have sent a letter to the FTC to that effect. From their letter, which is reproduced below, it appears that the Senators are concerned both about the disparity of biosimilar entry dates between the U.S. (2023) and Europe (October 2018) as well as the cost reduction provided by generic competition.
Senators Klobuchar and Grassley have long supported efforts to combat anti-competitive tactics and promote generic competition in the drug industry. The senators are lead sponsors of the Preserve Access to Affordable Generics Act, that would limit “pay for delay” deals where settlement agreements are used to delay generic drugs from reaching consumers. Senators Grassley and Klobuchar also introduced the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act, which addresses abuse and delay tactics that prevent generic companies from performing the required testing and distribution necessary for FDA approval.
It should be noted that despite the high cost of Humira®, which has been the top-selling biologic drug for several years, the size of a price reduction when a biosimilar enters the market is unlikely to be as great as we have seen for generic small molecule drugs. Nevertheless, both brand and biosimilar manufactures should be aware that any settlement agreements they enter into may be scrutinized by the FTC.
Dear Chairman Simons:
We write to urge the Federal Trade Commission (FTC) to look into whether strategies to hinder or delay generics from entering the market – such as anticompetitive "pay for delay" settlement agreements that have plagued generic pharmaceutical markets for years – may be being utilized for settlements regarding biologic medicines.
As you are aware, the FTC estimates that these pay for delay settlements can cost consumers and taxpayers $3.5 billion in higher drug costs every year. Since 2001, the FTC has filed a number of lawsuits to stop these deals, and has worked with Congress on legislation to end pay for delay settlements. We would like to continue those efforts to combat these agreements and explore their impact on the biologic market.
Biologics play an important role in treating many serious illnesses and are among the fastest growing classes of therapeutic products. As they are more expensive than simple molecule pharmaceuticals, biologics constitute a substantial and increasing proportion of our nation's healthcare costs. Without biosimilar competition, U.S. patients and payers will likely see additional price increases on biologics in the years to come.
For example, AbbVie Inc.'s (AbbVie) Humira is a biologic medicine that treats multiple inflammatory diseases and is the world's top-selling prescription drug with annual sales of $16 billion, including more than $10 billion in the United States alone.
Over the past year, AbbVie entered into global settlement agreements of all intellectual property litigation with both Amgen Inc. (Amgen) and Samsung Bioepsis (Samsung) over their biosimilars of Humira. Under the agreements, Amgen and Samsung will not launch their products in the United States until 2023, but both companies will be able to launch their biosimilars into the European market in October 2018. This means that while European patients will benefit from biosimilar competition later this year, Americans may be without access to Humira biosimilars for almost five more years. While such terms in patent settlement agreements may not always be inappropriate, the incentives for parties to delay biosimilar entry are present, and biologic markets could be susceptible to patent settlement abuse.
In light of the importance of biosimilar competition to drive down prices and improve the quality of life for American patients, we urge the FTC to examine global patent settlements relating to biosimilars to ensure they are not in violation of antitrust laws.
Thank you for your prompt attention to this important matter. We appreciate the FTC's efforts to ensure that potentially anticompetitive practices do not impede competition in the pharmaceutical market.
Last week, Senator Orrin Hatch (R-UT), co-author of the Hatch-Waxman Act, introduced an amendment in the Senate Judiciary Committee called the Hatch-Waxman Integrity Act of 2018. According to Senator Hatch, the purpose of the amendment is to restore the careful balance the Hatch-Waxman Act struck to incentivize generic drug development while protecting drug innovators. The amendment is in response to what many consider to be an abusive practice of filing inter partes review (IPR) against brand name pharmaceuticals. According to Senator Hatch:
“I have a keen interest in ensuring we have a well-functioning generic drug industry. Well, there are two sides to that coin. One is ensuring that generic companies are able to develop drugs. The other is ensuring that brand companies have sufficient protections in place to recoup their investments. It won’t do to give generics the ability to develop and market low-cost medications if brand companies don’t have the incentive to create those medications in the first place. And so Hatch-Waxman struck a careful balance, one that has endured for decades.”
While the new Act is far from being enacted, it is helpful to analyze the motivation behind the new Act and its possible impact on the pharmaceutical industry. To this end, the two sides to this coin are summarized here, along with details about the consequences of enacting Senator Hatch’s proposed new amendment.
In 1984, the Hatch-Waxman Act was passed to encourage generic drug manufacturers to challenge patents of brand name drugs by filing Abbreviated New Drug Applications with the Food and Drug Administration. The law allowed generic manufacturers to rely on the Food and Drug Administration's safety and efficacy findings for the original branded drug, while also allowing brand makers to automatically invoke 30 months of guaranteed exclusivity for their products simply by filing a patent infringement lawsuit against any generics applications. At the end of the day, the generic was able to enter the market faster and cheaper while the brand product was still allowed to maintain its market exclusivity and recoup its expenses. The Hatch-Waxman Act is considered to be a win-win for both sides.
Since the IPR process became available under the America Invents Action of 2011, however, its availability has threatened to upend the careful Hatch-Waxman balance. Originally created in response to the practices of “patent trolls,” deemed abusive by some, IPRs offer petitioners a faster and cheaper way to challenge patent validity apart from traditional litigation. The results have been staggering. Of those patents that have been challenged and review has been instituted, more than 80 percent are either completely overturned or amended. By providing a backup challenge to a drug patent even after losing in Hatch-Waxman litigation, Senator Hatch argues, IPRs add additional pressure on drug innovators beyond pressure already inherent in the Hatch-Waxman Act, thereby upsetting the careful balance Senator Hatch attempted to establish.
Senator Hatch’s proposed amendment seeks to rebalance the pharmaceutical industry competitive equation by giving generic manufactures as well as biosimilar manufacturers, a choice between pursuing a Hatch-Waxman challenge or an IPR challenge, but not both.
Under the new amendment, the generic or biosimilar manufacturer would need to make the choice upon seeking seek FDA clearance on “abbreviated” pathways, which requires the company to make certain certifications to the agency. Senator Hatch’s amendment seeks to add another certification to that process, which would require applicants to state that they have not used the America Invents Act’s inter partes review or post-grant review (PGR) processes for patents related to that therapy, and that they will not use those processes in the future.
Senator Hatch’s amendment would also bar applicants from relying “in whole or in part” on PTAB decisions from an IPR or PGR proceedings. According to Senator Hatch’s office, this would require a certification from the applicant that the application is not relying on an IPR or PGR determination in its certification that the relevant listed patent is ‘invalid or will not be infringed by the manufacture, use, or sale of the new drug.” The purpose of this separate certification is likely to ensure that the applicant will: 1) not institute a post-grant proceeding against the challenged patent in addition to seeking invalidity of the patent through the regular court system, and 2) not already have challenged the patent in question by means of the AIA post-grant proceeding avenues and now rely on those results to seek FDA approval.
Additionally, the amendment seeks to curtail hedge funds from profiting off of an IPR challenge by short-selling a company’s stock. In practice, Hatch’s amendment would treat short-selling a company’s stock within 90 days before or after filing an IPR on a patent held by that company as a “manipulative or deceptive device” barred by the Securities Exchange Act.
Senator Hatch’s amendment is supported by the Pharmaceutical Research and Manufacturers of America or PhRMA, a powerful trade association for brand makers. According to the group, Hatch-Waxman should be the only means by which generics patent disputes should be resolved. Brand makers feel that having two different systems with different standards and procedural rules creates business uncertainty for brand companies.
Opposing the amendment is the Association for Accessible Medicines (AAM), which was formerly known as the Generic Pharmaceutical Association, a trade association for generics drug makers. According to the group, Hatch-Waxman and IPR proceedings serve different functions and Congress intended to make both systems available. By preventing generic and biosimilar manufacturers from using both systems, brand companies, according to the AAM, would be allowed “to use the patent system to extend their monopolies well past congressional intent.”
We will continue to keep you informed of developments in this field as they occur.
On June 4, 2018, Director Andrei Iancu discussed his goals for improving the U.S. patent system at the BIO International Convention taking place in Boston. Director Iancu was sworn in on February 8, 2018 as the new director of the USPTO. Director Iancu spoke very thoughtfully on his vision for bringing clarity to Section 101, modifying the amendment process during an inter partes review (IPR), and celebrating the achievements of the U.S. patent system.
First on his agenda as he begins his new role as Director of the USPTO is to clarify and simplify the requirements for patentable subject matter under 35 U.S.C. § 101 (Section 101) so that inventors, investors, and patent attorneys alike understand which inventions qualify for patent protection. Director Iancu lamented that innovators are discouraged from applying for a patent because they are uncertain as to whether they, first, will be able to obtain a patent, and second, whether that patent will withstand post-grant challenges. According to Director Iancu, such uncertainty is not good for the economy or the system.
Since Section 101 has changed very little since the beginning of the U.S. Patent System in 1793 while technology has changed greatly, Director Iancu views this problem as an opportunity to update the laws to reflect the current state of innovation. He believes that changes to Section 101 should be technology and industry neutral rather than being tailored to any one specific area. In other words, Director Iancu believes that guidance from the USPTO needs to apply to biotech just as it needs to apply to computers. Initial guidance from the USPTO addressing Step 2 in Alice/Mayo is already available and Director Iancu promises that additional guidance on Section 101 will be forthcoming. Initial guidance addressing Step 2 in Alice/Mayo is already available and Director Iancu promises that more will come in the upcoming months. Moreover, Director Iancu cautions that any further changes must operate within the framework set forth by the courts, including U.S. Supreme Court decisions. Given the lack of certainty surrounding the requirements of Section 101, any clarification and simplification of those requirements would certainly be welcomed by many in the industry.
Second, Director Iancu wants to focus on modifying the IPR amendment process during an IPR such that patent holders are provided the opportunity to amend their patents rather than losing their patents entirely. Director Iancu does not want the IPR process to be “all or nothing.” Rather he wants both parties to work together, within the 12 to 18 month timeframe allotted by the IPR process, to come up with patent claims that could be workable in view of the findings of the IPR. The amended patent claims, according to Director Iancu, would then be examined by the PTO. The obvious benefit of having such an amendment process would be that patent holders would be given the opportunity to save their patents, and thus their investments, from loss.
Finally, as we near the ten millionth issued patent, Director Iancu wants to focus on the brilliance of inventors and the patent system rather than focusing on its shortcomings. He believes that focusing on the negatives of the patent system undermines the overall patent system and everything it is trying to achieve. Instead, Director Iancu wants to work within the scope provided by the courts to improve the system so that the next generation has role models to aspire to.
Overall, I was inspired by Director Iancu’s goals for his tenure. I look forward to seeing how his visions translate into specific actions in the upcoming months.
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.