On April 26, 2017, the Supreme Court heard oral arguments in Sandoz Inc. v. Amgen Inc. Sandoz was represented by Deanne E. Maynard, and Amgen was represented by Seth P. Waxman. In addition, Anthony A. Yang presented the position of the United States. The Court considered two issues: (1) whether a biosimilar applicant is required to provide the reference product sponsor ("RPS") with its abbreviated biologics license application ("aBLA") and related manufacturing information in order to take advantage of the abbreviated approval process, and (2) whether the 180-day notice of commercial marketing can be given before FDA approval. In addition, Amgen had originally included causes of action under California state law because Sandoz refused to participate in the patent dance. Justice Gorsuch, in his first oral argument related to patent law as a Supreme Court Justice, brought up the issue of preemption and state law. In this first post related to the oral argument, we will address the first of these issues related to the so-called patent dance, and review the issue regarding preemption.
Patent Dance
The majority of the oral argument dealt with the question about the Notice-of-Commercial marketing provision. We will address that section in an upcoming post. Nevertheless, there was enough discussion about the patent dance that it is possible to glean some insights into the thoughts of the Justices. As a reminder, the patent dance kicks off with the disclosure of the biosimilar application, as well as the process of manufacture, by the subsection (k) applicant. The statute at subsection (l)(2) reads:
(2) SUBSECTION (k) APPLICATION INFORMATION.—Not later than 20 days after the Secretary notifies the subsection (k) [biosimilar] applicant that the application has been accepted for review, the subsection (k) applicant—
(A) shall provide to the reference product sponsor a copy of the application submitted to the Secretary under subsection (k), and such other information that describes the process or processes used to manufacture the biological product that is the subject of such application; and
(B) may provide to the reference product sponsor additional information requested by or on behalf of the reference product sponsor.
42 U.S.C. § 262(l)(2) (emphasis added). However, the BPCIA appears to include a remedy should the biosimilar applicant not disclose the requisite information:
If a subsection (k) applicant fails to provide the application and information required under paragraph (2)(A), the reference product sponsor, but not the subsection (k) applicant, may bring an action under section 2201 of Title 28, for a declaration of infringement, validity, or enforceability of any patent that claims the biological product or a use of the biological product.
42 U.S.C. § 262(l)(9)(C). Moreover, the section of the patent statute dealing with patent infringement actions also suggests a remedy for such a failure to disclose:
It shall be an act of infringement to submit—
if the applicant for the application fails to provide the application and information required under section 351(l)(2)(A) of such Act, an application seeking approval of a biological product for a patent that could be identified pursuant to section 351(l)(3)(A)(i) of such Act,
if the purpose of such submission is to obtain approval under such Act to engage in the commercial manufacture, use, or sale of a drug, veterinary biological product, or biological product claimed in a patent or the use of which is claimed in a patent before the expiration of such patent.
35 U.S.C. § 271 (e)(2)(c)(ii).
Sandoz was questioned about how the reference product sponsor will be able to know with certainty just which patents are being infringed if the biosimilar application does not disclose the requisite information. For example, Justice Sotomayor challenged Sandoz, asking:
[C]ould the company with the product file a declaratory judgement action when they don't know what you're going to do? Do they have a good-faith basis for believing you're going to infringe if they don't have the application to look at until they get discovery?
Counsel for Sandoz responded in the affirmative, pointing out that "by definition, a biosimilar is highly similar to the reference product sponsor's product." When Chief Justice Roberts pushed back on this point, noting that "by definition, the biosimilar is similar; it's not identical," counsel responded:
But the question is whether or not you have a good-faith basis to sue. And given the standard of highly [sic] similarity and the kind of similarities there have to be, if the sponsor has any patent that covers its product, this product itself or any uses of the product, it would have a good-faith basis to sue, which is exactly what Amgen did here.
She explained that Congress created this statutory artificial act of infringement for this very reason. With no significant follow-up questions, it is possible that the Justices were satisfied with this response.
With respect to Amgen's position, one of the factors it is required to overcome is that the BPCIA appears to include a remedy when a biosimilar applicant refuses to "dance." For example, Justice Gorsuch questioned counsel for Amgen by asking:
But the question still remains under . . . (l)(9)(c), what the remedy is. And we've heard from the other side that the exclusive remedy is a declaratory judgement action. And how can we possibly decide what (2)(A) means without taking a peek at (9)(c) as to what remedies are permitted.
Importantly, Justice Gorsuch was willing to "spot" Amgen the assumption that "shall" means shall. But, as he put it:
[I]t's hard to divorce a right from its remedy, isn't it, and to understand the contours of the right. And if (2)(A) gives you a certain right to information, we usually understand the right in the context of the remedy provided.
Counsel for Amgen responded to this issue by alleging that (9)(C) was not meant to provide a remedy to the reference product sponsor, but rather it was meant to specify who cannot bring a declaratory judgement action, specifically the biosimilar applicant:
9(C) says if you don't provide that (2)(A) information, you, the applicant, can't ever file for a declaratory judgement action, but (9)(C) doesn't remedy the sponsor's harm . . . 9(C) simply confirms what is -- what should be obvious, which is if it isn't provided, the sponsor is left to his background rights to -- to litigate the declaratory judgment action.
However, the Justices did not seem convinced. As such, it would appear as though the Supreme Court is likely to come to the same conclusion as the Federal Circuit -- that even though "shall" normally means "shall," because the statute specifies the remedy, the biosimilar applicant is free to accept the consequence for not satisfying this requirement.
State Law and Preemption
After Sandoz refused to provide its aBLA, Amgen filed suit in the U.S. District Court for the Northern District of California. Interestingly, a number of the allegations fell under California state law. For example, the first cause of action in the complaint alleged that the Sandoz action of filing its BLA and planning for launching its biosimilar drug product was a violation of California's state law of unfair competition. Specifically, Amgen alleged, in part, that the use of the abbreviated biosimilars pathway without complying with the statutory requirements of the BPCIA was a direct cause of economic injury. Amgen also asserted a cause of action for conversion based on the use of Amgen's information related to safety, purity, and potency. If Sandoz does not adhere to the patent exchange provisions of the BPCIA, Amgen argued, it should not be entitled to rely on the efforts of the reference product sponsor.
The parties did not raise the state law and preemption issue because the Federal Circuit decision rested solely on Federal law. Nevertheless, Justice Gorsuch brought it up during the argument by the assistant to the Solicitor General. Specifically, he was concerned that if (l)(9)(C) was viewed as the exclusive remedy, "what happens when we have a claim under State law that no one's argued is preempted?" Chief Justice Roberts echoed the concern:
And in terms of the preemption question, it seems to me that it's very hard to give a comprehensive answer to the questions presented without considering whether, well, thanks for your opinion on what Federal law does, but, in fact, State law, you can get the same injunction. It's really asking us to put together a puzzle where a big piece is missing.
Nevertheless, the assistant to the Solicitor General pointed out that there would be no issue, as there would be "no State law claim, because your state law claim is predicated on violating the Federal law."
Justice Sotomayor also expressed concern regarding this issue during Amgen's argument. Specifically, she questioned counsel for Amgen:
What you're not telling me is, it's no longer a choice . . . because State law can force them . . . through you seeking injunctions to participate unwillingly.
In fact, she pointed out that every time a biosimilar application refused to participate in the patent dance, the reference product sponsor could:
[J]ust run to court and say, my State law remedy is force them to take the next step. Give me the application, then identify, then do this. You're going to -- there's no longer a choice.
Counsel for Amgen tried to avoid the subject by pointing out that the state law was not preempted, but that it was not appropriate to address it at this time. He started by citing the Bates v. Dow Agroscience, which he had argued, but the Court ruled against his client in that case holding that because Texas made it a violation to fail to comply with a Federal statute, the plaintiff was entitled to a state law remedy. This was true, even though Congress did not provide for a remedy in the statute. He ultimately concluded that, even though the result would be unsatisfactory, the Court should not be deciding that issue at this time. Correspondingly, it will be interesting to see if the Court addresses the preemption issue when it issues its decision by the end of June.
