Denied! District Court Rules in NEUPOGEN Biosimilar Litigation; Says that the BPCIA’s “Patent Dance” Procedures are Optional, and Notice Can Come Before Commercial Marketing

By Kurt R. Karst –      

Hopes for a victory were running high among folks in the blossoming biosimilars industry after Judge Richard Seeborg of the U.S. District Court for the Northern District of California indicated at a hearing last Friday (March 13th) that he wasn’t inclined to grant a Motion for a Preliminary Injunction filed by Amgen Inc. (“Amgen”) in litigation with Sandoz Inc. (“Sandoz”) over a biosimilar version of Amgen’s NEUPOGEN (filgrastim) and concerning the applicability and interpretation of various provisions of the the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”).  FDA approved Sandoz’s Section 351(k) biosimilar application – the first – under BLA 125553 as ZARXIO (filgrastim-sndz) (a placeholder non-proprietary name) on March 6, 2015 and promptly added it to the Purple Book.  ZARXIO is not yet marketed because of the pending litigation in California; however, in a court filing last month, Sandoz said that company “will not launch its biosimilar filgrastim product in the United States until the earlier of April 10, 2015, or a ruling in Sandoz’s favor on Amgen’s Motion [for a Preliminary Injunction].”  Well, that ruling has now come out.  And Sandoz scored a total knockout!  In a 19-page decision, Judge Seeborg denied Amgen’s Motion for a Preliminary Injunction, as well as an earlier filed Motion for Judgment on the Pleadings or, in the Alternative, Motion for Partial Summary Judgment.  Judge Seeborg also granted certain patent-related counterclaims filed by Sandoz.  Although an appeal – perhaps along with a request for emergency relief in the form of an injunction – seems likely, the victory scored by Sandoz, if upheld, could forever alter the biosimilars landscape in the U.S. by affirming that the complex patent resolution procedures under the BPCIA (which some might say are a disincentive to seeking approval of a highly similar biosimilar or interchangeable biosimilar biological product) are not the only game in town. 

The March 19th decision stems from a Complaint Amgen lodged last October alleging that Sandoz unlawfully refused to follow certain procedures created by the BPCIA (see our previous posts here and here).  In particular, Amgen alleged that Sandoz unlawfully opted out of the information and patent exchange procedures (i.e., the “patent dance”) at PHS Act § 351(l)(2)-(8), and that despite Sandoz’s assertions that the company already provided 180-day notice of commercial marketing to Amgen required under PHS Act § 351(l)(8)(A), such notice cannot be provided until at least FDA approval of a Section 351(k) application.  In making these allegations, Amgen asserted several causes of action, including unfair competition under Cal. Bus. & Prof. Code § 17200 et seq., conversion, and infringement of U.S. Patent No. 6,162,427 (“the ‘427 patent”) covering a method of using NEUPOGEN to treat a disease requiring peripheral stem cell transplantation in a patient in need of such treatment.  Sandoz filed various counterclaims, including seeking declarations that the ‘427 patent is invalid and not infringed by Sandoz.  Amgen later argued that the ‘427 patent counterclaims are barred because PHS Act § 351(l)(9)(C) mandates that only Amgen (and not Sandoz) may file a declaratory judgment action at this stage in the process. 

The dispute spilled over to FDA in the form of a Citizen Petition (Docket No. FDA-2014-P-1771), in which Amgen asks FDA to adopt policies and procedures to require biosimilar applicants – before their applications are accepted for review by FDA – to certify to the Agency that they will comply with PHS Act § 351(l)(2)(A) by providing the reference product sponsor with a copy of the Section 351(k) application “and such other information that describes the process or processes used to manufacture the biological product that is the subject of such application” within 20 days after FDA informs the biosimilar applicant that its 351(k) application has been accepted for review (see our previous post here).  FDA has not yet ruled on that petition. 

In his March 19th decision, Judge Seeborg, ruling on the mandatory or discretionary nature of the patent dance provisions, said that although the BPCIA repeatedly uses the word “shall” to describe the parties’ obligations under the disclosure and negotiation  procedures, Sandoz’s interpretation of the statute as permissive is more persuasive.  According to Judge Seeborg:

While Amgen correctly notes that subsection (l) uses the word “may” in certain paragraphs, thereby suggesting that the use of “shall” in others implies an action is required, several countervailing factors reflect otherwise.  First, that an action “shall” be taken does not imply it is mandatory in all contexts.  It is fair to read subsection (l) to demand that, if both parties wish to take advantage of its disclosure procedures, then they “shall” follow the prescribed procedures; in other words, these procedures are “required” where the parties elect to take advantage of their benefits, and may be taken away when parties “fail.”

That compliance allows an applicant to enjoy a temporary safe harbor from litigation and, potentially, to resolve or narrow patent disputes outside court proceedings, bolsters this reading.  Subparagraphs (l)(9)(B) and (C) contemplate the scenario in which an applicant does not comply at all with disclosure procedures, or fails to follow through after having begun the process.  They allow the reference product sponsor to commence patent litigation immediately in either instance—removing (or precluding) availability to the applicant of a litigation safe harbor.  Congress took the additional step in the BPCIA to amend 35 U.S.C. § 271(e) to add that an applicant’s failure to disclose information regarding a potentially infringed patent under subsection (l)’s requirements is immediately actionable, making it clear that such a dispute is ripe for adjudication. . . . 

Further, while Amgen contends persuasively that use of subsection (l)’s procedures can serve important public interests, including potential reduction of patent litigation and protection for innovators, nowhere does the statute evidence Congressional intent to enhance innovators’ substantive rights.  In contrast to numerous other federal civil statutes which offer a claim for relief and specify remedies, here Congress did more than remain silent—it expressly directed reference product sponsors to commence patent infringement litigation in the event of an applicant’s non-compliance.  Even in subsection (l) itself, subparagraph (l)(8)(B) is clear in providing the remedy of a preliminary injunction for failure to give the 180-day notice required in (l)(8)(A).  It is therefore evident that Congress intended merely to encourage use of the statute’s dispute resolution process in favor of litigation, where practicable, with the carrot of a safe harbor for applicants who otherwise would remain vulnerable to suit.  The statute contains no stick to force compliance in all instances, and Amgen does not identify any basis to impute one.

Furthermore, wrote Judge Seeborg, the decision not to comply with the information exchange and patent dance procedures reflects how the BPCIA’s overall scheme operates in a way to promote prompt resolution of patent disputes.  “An applicant who values expedience over risk mitigation may believe that the disclosure and negotiation process would introduce needless communications and delay,” wrote Judge Seeborg.  “Such an applicant may have good reason to believe that no unexpired relevant patents relate to its biosimilar, and that it is likely to prevail if challenged with an infringement suit.”  As such, a Section 351(k) applicant “may, in such an instance, opt to forego its ability to bring certain types of declaratory actions and receive information about potentially relevant patents from the reference product sponsor, and instead commence litigation immediately.” 

With respect to the 180-day notice provision at PHS Act § 351(l)(8)(A), which states that a Section 351(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),” Judge Seeborg also handed Sandoz a victory.  Amgen argued that the word “licensed” in the provision means that a Section 351(k) applicant cannot provide notice until FDA approves a Section 351(k) application.  Accepting this interpretation would, of course, result in a de facto 6-month period of marketing exclusivity.  In his decision, Judge Seeborg found Amgen’s interpretation unworkable and problematic:

[T]he more persuasive interpretation accounts for the fact that FDA approval must precede market entry.  It would be nonsensical for subparagraph (l)(8)(A) to refer to a biosimilar as the subject of a subsection (k) application because upon its “first commercial marketing” a biosimilar must, in all instances, be a “licensed” product. “Before” modifies “first commercial marketing”; “licensed” refers only to “biological product”—not the appropriate time for notice.

Even more problematic with Amgen’s reading is the impact it would have on the overall statutory scheme.  Because the FDA cannot license a biosimilar until twelve years after approval of a reference product, Amgen’s reading would tack an unconditional extra six months of market exclusivity onto the twelve years reference product sponsors already enjoy under 42 U.S.C. § 262(k)(7)(A).  Had Congress intended to make the exclusivity period twelve and one-half years, it could not have chosen a more convoluted method of doing so.  Moreover, Congress presumably could have been far more explicit had it intended for infringement suits to commence only once a biosimilar receives FDA approval.  It was, therefore, not wrongful for Sandoz to give Amgen its 180 days’ notice prior to first commercial marketing pursuant to subparagraph (l)(8)(A) in July 2014, in advance of receiving FDA approval.

As a result of his decisions on the patent dance and notice provisions, Judge Seeborg dismissed with prejudice Amgen’s state-law unfair competition and conversion claims. 

Moving on to Sandoz’s counterclaims for non-infringement and invalidity of the ‘427 patent and Amgen’s contention that PHS Act § 351(l)(9)(C) bars those counterclaims, Judge Seeborg turned to the statutory text, which states that where a Section 351(k)  applicant has not provided its biosimilar application and manufacturing process information to the reference product sponsor, “the reference product sponsor, but not the subsection (k) applicant, may bring an action under section 2201 of title 28, United States Code, for a declaration of infringement, validity, or enforceability of any patent that claims the biological product or a use of the biological product.”  Noting that “[a]sserting a counterclaim is not the equivalent of commencing a lawsuit,” Judge Seeborg ruled that Sandoz’s ‘427 patent counterclaims are not barred by the BPCIA:

The BPCIA addresses only an applicant’s ability to “bring an action,” not to assert a counterclaim if placed in a position to defend against an infringement suit.  Furthermore, as Sandoz’s counterclaims arise from the same transaction or occurrence that is the subject of Amgen’s claim—the validity and relevance of Amgen’s ’427 patent—they are compulsory, and would be waived if not asserted.  Barring such claims in particular raises “real due process concerns.”

Given his decision concerning each of the issues above, Judge Seeborg saw no basis to grant Amgen’s request for a preliminary injunction, and wrote that the path seems to be  clear for Sandoz to begin marketing ZARXIO:

As the twelve-year exclusivity period for Neupogen long ago expired, there exists no substantive bar to market entry for Sandoz’s biosimilar filgrastim—and, consequently, no basis on which Amgen is entitled to injunctive relief or other remedies for disadvantages it may suffer due to market competition from Sandoz.

Judge Seeborg’s decision might also help clear the path for marketing another biosimilar biological product (provided it clears the FDA approval hurdle): Celltrion, Inc.’s and Hospira, Inc.’s biosimilar version of Janssen Biotech, Inc.’s (“Janssen’s”) REMICADE (infliximab).  Earlier this month, Janssen filed a Complaint in the U.S. District Court for the District of Massachusetts alleging, among other things, that Celltrion and Hospira unlawfully circumvented the patent dance procedures and provided ineffective notice of commercial marketing.